October 29, 2018 / 12:07 PM / 24 days ago

China tells speculators not to hope for relaxed curbs on property purchases

BEIJING (Reuters) - China warned property speculators against holding false hopes for a price rally, in a report on Monday by state news agency Xinhua that said authorities would not loosen curbs on buyers to spur investment even as the economy slows.

Residential buildings are seen along the Fourth Ring Road in Beijing, China July 16, 2018. REUTERS/Jason Lee

Since 2016, authorities have introduced various tightening measures to rein in prices in hundreds of Chinese cities, including restricting multiple home purchases and raising the bar for mortgage lending.

While property price gains have become more modest, the overall market proved relatively resilient, as many investors exploited regulatory loopholes and turned to smaller and less-restricted cities.

Optimism has also been high as they bet on local governments’ reluctance to trigger a market correction, as municipalities heavily rely on revenue from real estate.

“Speculative buyers, land revenue addicts, and even the entire society need to recognize the general trend and lose the illusion that the regulation will be relaxed due to the downward pressure on the economy, that there will be a ‘re-ignition’ of house prices,” Xinhua said.

China’s economic growth cooled to its weakest quarterly pace since the global financial crisis in June-September, as a years-long campaign to tackle debt risks and the trade war with the United States began to bite.

Some banks in China, including Minsheng Bank’s branches in Beijing and Shenzhen, and PingAn Bank, HSBC, and China CITIC Bank’s branches in Hangzhou, have recently moved to lower mortgage interest rates by 5 to 10 basis points for first time property buyers, according to Li Weiyi, a mortgage analyst with Rong360.com, a mobile financing platform which tracks bank lending data.

It’s likely due to a spill-over effect from China’s recent moves to cut banks’ reserve requirements to boost market liquidity, Li said, adding that mortgage loans have been issued at a faster pace nation-wide.

Xinhua described recent market speculations that the government would relax regulation on residential real estate as “noise”.

The Xinhua report said a “long-term mechanism” - including the potential introduction of a nation-wide property tax - is being studied, and existing administrative controls would not be abandoned halfway.

“[We] will not allow any relaxation of regulatory policies that are already established, nor allow house prices to rise,” It said.

China’s new home prices increased at a firm pace in September, supported by gains in smaller cities. Average new home prices in China’s 70 major cities rose 0.9 percent in September from a month earlier, Reuters calculated from official data.

Reporting by Yawen Chen and Ryan Woo; Editing by Simon Cameron-Moore

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