Local governments of China’s cities set up measures to address sharp increase in property prices

Local governments of China’s major cities set up series of measures in the last few days to address the sharp increase in property prices. Prices in Shanghai and Shenzhen rose 21% y/y and 57% y/y, respectively in February. In Shanghai, down payment for second homes increased to 50-70% from earlier 30%, while in Shenzhen it was raised to 40%.

Meanwhile, tax contribution period for buyers without local residential permits in the two cities was increased to five years in Shanghai from two years, whereas it was increased to three years in Shenzhen from one year. 

Overall, the moves emphasise the different approach taken to deal with property market in China. On the other hand, there are attempts made in lower tier cities to boost demand and to bring down the high inventories of unsold houses. So far, the housing market has not been a problem for the FX market.

Meanwhile, industrial profits in China for January-February increased 4.8% y/y as compared with December’s -4.7%. The National Bureau of Statistics, in spite of positive reading, stated that the industrial sector faces issues and significant downward pressure.