All pre-crisis property market support measures have been reversed by Beijing’s municipal government in a bid to cool the capital’s bubbling housing market which saw downtown prices grow almost 60% in the fourth quarter. The move, announced by the Beijing Municipal Commission of Housing and Urban-Rural Development, has also been backdated, terminating preferential policies from January 1, 2010.
The reversal affects several areas: mortgage downpayments on second homes will return to 40% from 20%; individual homeowners must wait a minimum of five years before selling their property free of business tax instead of two years; non-nationals can purchase no more than one property – to be occupied by the buyer – after having worked or studied in Beijing for at least one year.
These changes are designed to cool, not cripple, the local property market. End-user demand remains strong in Beijing and the measures themselves are largely targeted at niche areas: higher downpayments hit the top end of the market hardest, and this is populated by high net worth individuals rather than first-time buyers. Similarly, foreigners account for only 5% of sales, and most purchases are long-term investments focusing on luxury property.
The key point to note is the timing of the announcement ahead of the National People’s Congress. While no nationwide initiative is in place to ease upward pressures on the property market, Beijing’s action could be the precursor to a wider clampdown instigated either on a unilateral basis or by individual provincial or city governments.