Tighter rules in Shenzhen on home purchases

BEIJING: Shenzhen has become the first city to respond to the central government's latest effort to restrain the red-hot property market by limiting families with residency status to the purchase of only two homes.

People who live in the city but do not have a hukou or residency status will not be allowed any additional home purchases but may buy a single home if they can provide proof of having paid tax or contributed to a social security fund for one year.

The rules were published in a Shenzhen government announcement released on Thursday - the day before the National Day "golden week" holidays began. The break, from October 1 to 7, is traditionally an opportunity to go house-hunting.

Property agents said the tough measure would be a significant blow to home demand, as more than 60% of workers or residents in Shenzhen are immigrants who have not been granted Shenzhen hukou.

Hong Kong resident Samuel Wong Shu-kuen, who heads property agent Midland Realty's Shenzhen office, said: "I have been working in Shenzhen for more than 10 years. This is the toughest measure I have ever seen."

He said the measure would cut home demand and, as a result, it would substantially hit sales volumes. Prices may follow downwards.

Wong expected sales volumes could fall 50 per cent from the previous month. There were about 11,000 registered sales of secondary market homes in Shenzhen last month. But the figure reflected the market environment two to four weeks earlier, he said.

Beijing's municipal government announced it would limit buyers to purchasing just one home shortly after the central government announced its 10-point measures aimed at curbing demand and property prices in April.

As part of the latest round of cooling measures announced on Wednesday, the central government said provincial and city governments should judge if prices were rising too fast in their jurisdictions and, if so, put limits on the number of houses that a single family could buy.

"Prices in Shenzhen have probably gone up by 15% since April," Wong said.

Other key measures included in the central government announcement included the suspension of third-home mortgages; raising the down-payment requirement for first-time buyers to 30% from 20%; and ending favourable deed taxes and personal income taxes.

Previously, buyers of homes smaller than 90 square metres were required to make a 20% down payment, while those who bought larger units paid 30%.

The announcement also called for more stringent administration of a 50% down payment for second-home mortgages. Before the latest measures, third-home mortgages were selectively suspended in some cities, but not entirely banned.

David Ng, head of property research at Royal Bank of Scotland, said mortgage tightening measures had spread from curbing investors' financing to temporarily suppressing first-time buyer demand, indicating the seriousness of the current heated market.

The measures "are stronger than the idle land policy announced earlier, but are probably still not strong enough to cool the current market sentiment", Ng said. – South China Morning Post

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