More Chinese cities increase efforts to tighten home purchasing rules

Many more cities in China have increased attempts to tighten restrictions for buying first, second and even third homes to ease the overheated property markets in the midst of rising risks of housing bubbles and sharply increasing mortgage loans that account for a huge portion of consumer medium- and long-term loans, noted Scotiabank.

These moves come after the Chinese central government hinted the requirement to avert property bubbles from forming in the first and second tier cities. Tightening measures have spread from the first tier cities such as Shenzhen and Shanghai to tier-2 cities such as Suzhou and Nanjing and tier-3 city Zhuhai with considerable rises in housing prices.

While prices of property continued to increase throughout China in September, early indications of decelerating development in the real estate markets have been seen. This is likely to be a drag on Chinese economic growth in 2016, according to Scotiabank. Cumulative funds for property developers slowed to 14.8 percent year-on-year in August, whereas the pace of growth in China’s property investment came in at 5.4 percent year-on-year in the January-August period after a rise of 5.3 percent and 6.1 percent seen in the first seven months and the first half, respectively.

The moves have also expressed the country’s confidence in its economy for this year with infrastructure investment remaining one important growth engine. PBoC Deputy Governor Yi Gang stated that China would continue to use fiscal, monetary and structural reform policies to stimulate infrastructure investment and transform China’s economy into a consumption-driven economy, according to Reuters.