Fresh moves seek to sustain cleanup of residential sector amid restructuring

"There won't be any letup, we'll press on with crackdowns and policy tightening until your reform is inside out"-that could well have been the latest message sent by China's authorities to the seemingly recalcitrant property sector.

Last month, local governments across China rolled out additional, and stricter, policies to rein in home prices that threatened to spiral out of control again.

"The aim of this real estate reform is to ward off risks in the property sector that has attracted huge capital and public attention. This is crucial to China as the country is undergoing economic restructuring," said Lu Wenxi, a researcher from property consultancy Centaline Shanghai.

Agreed Zhang Dawei, chief analyst at Centaline Beijing. "By analyzing the National Bureau of Statistics data on home prices in 70 major Chinese cities in June, we found that about 92 percent of the 70 cities saw their new home prices and preowned home prices increase to the highest level since October 2016."

Zhang's reference was to the recently-published NBS data on first-half investments and sales relating to the real estate sector. NBS data showed investment in property development totaled 5.55 trillion yuan ($819.6 billion) from January to June, up 9.7 percent year-on-year. Residential property investment accounted for 70.2 percent, up 13.6 percent to 3.9 trillion yuan year-on-year.

Residential sales revenue soared almost 15 percent in the first six months this year. This is significant because it contrasts with a 3.2 percent drop in revenue from office realty sales and just a 5.7 percent rise in the commercial property sector.

Home prices in some, not all, big cities surged in spite of strict measures last year that checked runaway speculative investments. For example, in Beijing, one square meter of a new home sold for an average 53,107 yuan in June, 21 percent higher than the 43,891 yuan level at the beginning of 2017, but off the peak off 56,617 yuan in September, which receded to 50,990 yuan in January post-crackdown.

Similarly, in Shanghai, one square meter of a new home sold for an average 50,874 yuan in June, almost 9 percent higher than 46,782 yuan at the beginning of 2017, but a tad higher than the previous peak of 49,648 yuan in December; but post-crackdown, it fell to 42,544 yuan in February.

Similarly, in a tier-2 city like Hangzhou in Zhejiang province, the corresponding average price in June was 28,518 yuan per sq m (as against 21,829 yuan at the beginning of 2017, 28,162 yuan at the previous peak in October 2017, and 25,030 yuan in December after the crackdown).

The corresponding figures for a lower-tier city like Foshan in Guangdong province are 14,280 yuan now (as against 10,312 yuan at the beginning of 2017, 15,837 yuan at its peak in December, and 13,560 yuan in January after the crackdown).

NBS data summed up the price trend. Compared to last year, the four first-tier cities of Beijing, Shanghai, Guangzhou and Shenzhen reported no alarming rise in new home prices in June, and the prices of pre-owned homes rose just 0.1 percent.

However, in the same month, 31 tier-2 cities saw their home prices and used home prices rise 6.3 percent and 4.6 percent respectively from a year ago, widening the growth rates by 0.9 percentage point and 0.2 percentage point from May.

In addition, the other 35 tier-3 cities saw their new home prices increase 6 percent and used home prices by 4.3 percent.

Property industry experts warned home prices in lower-tier cities may run the risk of steep increases, given that top-tier cities appear to be falling in line, which could prompt investors to seek alternative destinations.

As if on cue, more than 40 Chinese cities announced 40-odd restrictions on the property sector as of July 28. The fresh curbs cover various aspects of the industry. In addition, Chinese cities unveiled more than 220 tightening measures since January, a two-year record.

Following up on last year's crackdown on irregularities in the residential market, central government entities such as the Ministry of Housing and Urban-Rural Development, the Ministry of Public Security, and the banking and insurance regulators launched a new round of cleanup campaign.

Speculation will be sought to be contained, illegal agencies will be identified and ejected from the market, developers disciplined and fake advertisements removed, industry insiders said.

The campaign to combat property irregularities, which began in July, will be carried out in 30 major cities till December-end. A notice on the Ministry of Housing and Urban-Rural Development's website stated that wrongful activities include price manipulation, deliberate delays in sales, illegal loans for down payment and publishing false price information to mislead buyers.

Among the 30 major cities that will scrutinize the local property markets are four top-tier cities (Beijing, Shanghai, Guangzhou and Shenzhen), second-tier cities (mostly provincial capitals such as Nanjing, Hangzhou, Wuhan and Chengdu), and some smaller cities such as Yichang and Foshan, according to the ministry notice.

Centaline Shanghai's Lu attributed the stable home prices in top-tier cities to the most drastic measures ever adopted. "Comparatively, the tightening policies of second-tier cities are less stringent, and the market is becoming more and more tolerant toward the new measures that are getting stricter gradually."