Winds of tightening controls in Shanghai's property market are frequent

Shanghai has stabilized its property market by easing supply, tightening pre-sale permits for high-end properties and regulating the trading market, according to the 21st Century Business Herald.

By Ji Ruikun, Beijing

"The down payment for the second suite has been raised to 70%," "restricting the eligibility of non-Shanghai nationals to buy homes," and "tightening price limits." ...... Rumors have been swirling since this week about various possible measures for a new round of regulation in Shanghai's property market.

The 21st Century Business Herald reporter learned that a number of departments, including the Shanghai Municipal Housing and Construction Commission and the Finance Bureau, are intensively researching the property market. In January and March this year, the Shanghai Municipal Development and Reform Commission led by the Shanghai Municipal Housing and Construction Commission, the Finance Bureau and other departments to participate in, but also through the convening of experts in the industry, through the internal symposium way to discuss the situation of the property market in 2016 and to seek advice.

At the latest seminar held on March 8, a leader of the Housing and Construction Commission said that it will strengthen the qualification audit of the purchase of housing, and further regulate the "downpayment loan" type of financial products, there is a greater probability of tightening the implementation of the "3-30 new policy" and so on.

In fact, according to the 21st Century Business Herald reporter understands, Shanghai has stabilized the property market by easing the supply of the property market, tightening the pre-sale permits for high-end properties, and regulating the trading market.

"Shanghai's new policy on the property market has been introduced at the executive level, only the policy is mostly aimed at the level of developers and the overall normative regulation of the market, the market is not very sensitive." Zhang Hongwei, director of the research center of Tongze Consulting, told the 21st Century Business Herald.

Intensive research

"Currently did not receive documents about the new Shanghai property market regulation and control upgrade." On March 23, the Shanghai Municipal Housing and Construction Commission Real Estate Policy Consultation Center told the 21st Century Business Herald on the phone.

However, the 21st Century Business Herald reporter learned from real estate consulting organizations and developers that the Shanghai Municipal Housing and Construction Commission, the Finance Bureau and other departments are intensively researching the property market and reserving policies.

On January 12, 2016, the Shanghai Municipal Commission of Housing and Construction had convened industry experts to hold an industry symposium on summarizing the 2015 property market and predicting the 2016 market.

A person who participated in the above symposium told the 21st Century Business Herald that during that time, the decision makers also particularly emphasized that they would guard against the overly rapid rise of Shanghai's housing prices in 2016 by strictly enforcing the purchase restriction and regulating the trading market.

Subsequently, on March 8, the Shanghai Municipal Development and Reform Commission, the Banking Supervision Bureau, the Housing and Construction Commission, the People's Bank of Shanghai headquarters also convened experts in the real estate industry to hold a seminar on the situation of Shanghai's property market and recommendations.

According to the 21st Century Business Herald reporter was informed that the two seminars are particularly talked about the risk of Shanghai's housing prices rising too fast, and to seek the views of all parties.

At an internal exchange meeting held on March 8, a division leader of the Shanghai Municipal Commission of Housing and Construction stated that the contradiction between supply and demand in the market is one of the important factors leading to the continuous rise in Shanghai's housing prices when analyzing the continuously rising housing prices in the Shanghai market.

According to its introduction, in recent years, the average land supply of 6 million square meters of planned floor space, while the market sales of 8 million square meters, the market has an annual supply gap of 2 million square meters.

Data from the Tongze Research Institute also showed that as of March 21, 2016, Shanghai's commercial residential inventory had dropped to 8,497,800 square meters, and according to the three-month moving inventory-to-sales ratio, the market's depreciation cycle had shortened to 6.02 months.

As a result, the Shanghai Municipal Planning and Land Resources Administration and other four departments issued a new policy on Feb. 24, requiring further increase in the proportion of small and medium-sized housing supply on commercial housing land, with no less than 70 percent in the central urban area and no less than 60 percent in the suburbs.

In addition, the 21st Century Business Herald reporter called a number of new housing agencies and Shanghai property developers and learned that the approval of pre-sale permits for high-end properties in Shanghai has also been tightened.

The above mentioned Shanghai Municipal Housing and Construction Commission's departmental leaders in the symposium also specifically mentioned, February 29 - March 6, Shanghai commercial residential "zero supply" because of the approval of the report are high-end real estate, so there is no approval. By tightening the approval of pre-sale permits for high-end properties, for the record, to prevent the overheating of high-end properties to drive the property market up too quickly.

New policy true or false investigation

While Shanghai from the strict implementation of price limits, emphasizing the increase in small and medium-sized units to curb overheating of the property market, but from the March market response, the short-term does not seem to have reversed Shanghai's hot property market.

By March 21, the number of commercial residential units sold in Shanghai in March had reached 1.36 million square meters. Zhang Hongwei predicted that the volume of commercial residential transactions in Shanghai in March will exceed 2.3 million square meters. Based on such estimates, Shanghai's commodity residential turnover in the first quarter of 2016 will exceed 4.4 million square meters.

"This is also unprecedented in history." Zhang Hongwei described.

Or because of this, after the 2016 National People's Congress, there have been rumors of multiple policy versions of upgrading the regulation of Shanghai's property market.

Of these, the most frequent rumors are aimed at raising the down payment of the second suite to 70%. It is reported that the previous "3-30 new policy", mainly adjusted the proportion of the second suite down payment, the proportion from 60% -70% down to 40%. And rumor has it that the second suite down payment ratio may return to 70%.

However, research director Yan Yuejin believes that the so-called "adjustment" is just playing word games. "In fact, the downpayment ratio for the second suite itself gives commercial banks relatively large room for maneuver, and it is likely to hurt the demand for improved home purchases by mistake, which is nothing more than a suggestion from some people to the decision-making authorities."

However, at an internal symposium on March 8, a division leader of the Shanghai Banking Regulatory Bureau also took a position on the need to implement a policy of differentiated tax rates for second suites, and suggested tightening the mortgage policy for non-ordinary housing.

In Yan's view, it is possible that the increase in down payment to 70% for the second suite will be partially implemented, i.e., for non-ordinary housing, so as to avoid hurting the demand for new and improved housing.

And regarding the restriction on non-Shanghai nationals will be upgraded from 2 years of social security to 5 years of social security, several industry insiders stated in an interview that the implementation of this policy is unlikely.

"Once implemented, Shanghai will surpass Beijing as the city with the strictest purchase restriction in the country, after all, Beijing's full 5 years of social security has no requirement for whether it is married or not." Ding Zuyu so introduced.

In fact, it is understood that the Shanghai municipal decision-making departments in the research repeatedly released a strict implementation of the purchase restrictions on the signal, but more emphasis on the details of the tightening, did not put forward the statement about improving the qualifications of non-family members to buy a house.

"According to the decision-making level of the statement, limit the purchase of audit front a high probability will be strictly enforced, but non-family members of the policy to raise the threshold of home purchase is unlikely to be introduced, after all, will be injured a large number of fresh demand, and for the suppression of the current rate of increase is not very meaningful." Yan Yuejin said.

It is worth mentioning that the crackdown on "down payment loans" and other over-the-counter funding or will be an important way to prevent the rapid rise in housing prices in Shanghai and reduce the risk of the property market, Yan Yuejin said, the current property market in Shanghai is overheating a fundamental reason for the relationship between supply and demand, and there are two ways to solve the problem, one is to increase the supply, and the other is to reduce the demand. One is to increase supply and the other is to reduce demand. Among them, it is very necessary to reduce investment demand other than non-demand and improvement demand.

Zhang Hongwei also introduced, the stock market and the property market there is a certain degree of mutual influence of the relationship between the stock market after the crackdown on the over-the-counter capital allocation, there is no way out of the funds to the property market, the property market, such as down payment loans and other over-the-counter capital allocation, which is to increase the risk of the property market is an important factor.

In the research, the Shanghai Banking Regulatory Bureau of a division leader in the internal symposium that has repeatedly emphasized the risk of off-site funding such as down-payment loans, and said that P2P funds are not allowed to enter the field of down-payment loans, in addition to mortgage loans, other funds can not enter the property market, and will strengthen the down-payment loan consumer finance business supervision.

(The above answer was posted on 2016-03-24, the current relevant home-buying policy please prevail)

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