BEIJING (Reuters) - China said on Thursday it would renew efforts to crack down on property irregularities in 30 major cities this year, mobilizing powers from seven major Chinese government agencies in a concerted effort to rein in rising prices.
The property market has been heating up lately, despite intensifying official curbs, prompting several local governments to announce new rules this month to limit companies from purchases.
On Thursday, the Chinese city of Chongqing also ramped up property controls. Chongqing, a southwestern city of more than 30 million, suspended new mortgage loans to non-residents without proof of at least one year of tax or social insurance payments in the city, according to the official Xinhua news agency.
China’s new home prices in May posted their fastest growth in nearly a year, extending their 38 months of price appreciation. More than 100 cities have tightened the market to varying degrees over the past two years.
The market’s surprising resilience underscores rampant fraud in the sector that has allowed buyers to skirt existing restrictions, and contrasts with persistent stock market weakness as tensions with the United States over trade dim China’s economic outlook.
Chinese shares fell to new two-year lows on Thursday, staying on course for their worst monthly performance in years.
China’s property market began to boom in early 2016 after the central government pumped up credit and relaxed housing curbs to stabilize the economy in the wake of the 2015/2016 stock market crash.
The crackdown, which would be carried out by government entities including the housing ministry and the Ministry of Public Security and the banking and insurance regulators, would focus on stemming speculation and target illegal agencies and developers and fake advertisements.
A notice published on the housing ministry’s website said irregularities included manipulating prices, deliberately holding off sales, illegally providing loans for downpayment and publishing false price information that misled buyers.
The four largest top-tier cities, including Beijing and Shanghai, and provincial capitals such as Wuhan and Chengdu, and also smaller cities, such as Yichang and Foshan, are among the 30 that will be scrutinized, the notice said.
While policymakers have been adamant in controlling runaway prices, they have also been careful not to step on the brakes too hard, as real estate remains a major driver of the economy. Growth in the world’s second-largest economy is at risk of slowing as the authorities try to tame rapid domestic credit growth at a time when a full-blown trade war with the United States could hurt the economic outlook.
The United States will begin collecting 25 percent tariffs on $34 billion worth of Chinese goods starting on July 6, and will take steps to launch tariffs on 284 new product lines.
To cushion the economy, the central bank said on Sunday it would cut the amount of cash that some banks must hold as reserves, releasing $108 billion in liquidity, to accelerate the pace of debt-for-equity swaps and spur lending to smaller firms.
While the People’s Bank of China has specified the use of the funds, analysts and economists are concerned that some would inevitably flow into “unproductive, traditional sectors” such as real estate.
“The phenomenon of chaotic debt issuance and overly stimulating the property market makes us worried that China’s economy is back to the traditional (credit-fuelled) development model,” researchers at Bank of China said in a report.
China’s state planner said on Wednesday it would restrict real estate developers from using funds raised via foreign debt for real estate investments, warning that their overseas debt issuance had been growing too quickly.
Additional reporting by Shu Zhang; Editing by Jacqueline Wong