Attempts to restrain China’s booming property market are now in full effect.
In December, the government issued guidelines to property developers that they had to pay 50% of any land purchase from the government up front. Further regulations added that any developers who failed to start building on their land within two years of purchase would forfeit their plots.
The move sent the shares of China’s top property developers tumbling, since it stopped them from accruing valuable land banks. Meanwhile, the State Council has reimposed a sales tax on homes sold within five years of the initial purchase, to curb speculation in real estate. In response, there has been a dip in sales volumes in some major cities, according to the Chinese media.
The question is: What is coming next?
Well, the 90/70 policy could be enforced, which requires developers to have 70% or more of their new builds to have floor plans of under 90 square metres. This helps create more affordable housing, rather than penthouses for the rich.
The policy was introduced in 2006, but never policed. Property developers argued that it was too prescriptive and the government shouldn’t interfere in the structure of the market.
More likely is that the authorities scrap the discounted mortgages under which homebuyers can get 30% off the benchmark bank interest rate. The Economic Observer newspaper reported that the China Banking Regulatory Commission has no intention of scrapping the policy yet, fearful of hurting lower income buyers, but it can only be a matter of time.