Shanghai unveiled on Friday a slew of new measures aimed at curbing its overheated property market, thus becoming the city to have one of the strictest requirements on residential home purchases across the country.
The tougher rules in China's financial center also renew concerns about whether the Chinese government has chosen the right course to regulate the country's property sector that appears to have been too hot in particularly first-tier cities, but too cold in many smaller cities with a surplus of unsold homes, argued economists and industry insiders on Friday at the annual conference of the Boao Forum for Asia (BFA).
The Shanghai municipal government announced at a press conference Friday morning that the city would tighten the criteria for potential buyers without local household registration, or hukou, increase the down payment requirements for some second homes and prohibit unregulated loans, effective immediately.
Specifically, potential homebuyers who do not have Shanghai hukou need to have paid social insurance or personal income taxes in the city for at least five consecutive years before being qualified for local home purchases. Previously, the requirement was two non-consecutive years.
Meanwhile, the city has also raised the minimum down payment ratio for buying a second home.
The new round of home purchasing curbs came at a time when the city's home market soared over the past months.
Shenzhen, which saw the biggest price increase in China in February, also published rules late Friday to rein in its runaway housing market through tightened home purchase restrictions, taking effect immediately.
East China's Jiangsu Province also reportedly circulated an urgent notice late Friday that requires the province's financial institutions to conduct stricter checks of homebuyers' actual housing demands, and their existing home ownership and home purchase records to strengthen the risk control of personal home loans since numbers have increased too rapidly in some cities like Nanjing and Suzhou.
But Shanghai's new rules, among an array of measures that have been announced by local governments across the country in recent years either tightening home purchase restrictions or enforcing the other way round, came under fire on Friday at a panel discussion of the BFA annual conference with a focus on China's property market.
"Given the current situation, these measures are essential, but relying too much on them will only point to more troubles in the future," Meng Xiaosu, chairman of China National Real Estate Development Group and a panelist, told reporters on the sidelines of the session.
Meng argued that real estate developers were more inclined to invest in cities with less or no purchase restrictions, noting that "since it takes time to increase home supplies in overheated markets in first-tier cities, local authorities had to take more restrictive measures, which can only be temporary."
It does not mean that there is an issue with the government's fine-tuning of the country's property market itself, but the efforts that have thus far appeared to be primarily "unscientific," Bao Yujun, former vice chairman of All-China Federation of Industry and Commerce, told the panel discussion.
To help stabilize the property market in a more predictable and sustainable way, the industry watchers argued that developed markets' experience could be drawn on to allow real estate market adjustments to happen in a more market-oriented fashion.
Real Estate Investment Trusts (REITs) could be a very constructive tool to be used by policymakers in the public to effectively help stabilize the real estate market across China, both in the commercial and residential side, Steven A. Wechsler, president and CEO of the National Association of Real Estate Investment Trusts, a US real estate industry body, told the Global Times on Friday on the sidelines of the forum.
"It's increasingly accepted around the world that REITs-based real estate investments help stabilize [the] financial system, because … the public market informed by transparency through the real estate ownership of public companies works to allow market signals to drive capital allocation," he explained.