For the first time since the spring, Beijing has taken serious measures to curb the country’s booming property market.
Deutsche Bank describes the measures:
After the market close the official press reported that the central government would take several further steps to curb property price inflation. The broad direction of these measures is consistent with our expectation. In our view, the most impactful measures are: (1) increasing the minimum mortgage down-payment ratio for first homes to 30% (previously it was 20% for homes below 90sqm); (2) official suspension of mortgage lending to 3rd home buyers (previously the State Council only said banks “could suspend” 3rd home mortgages); and 3) the government would “accelerate the pilot implementation of the property tax”.
Other noteworthy measures include suspension of financing (loans, bonds, and fund raising from the stock market) for developers that are found as hoarding land, and explicit limits on the number of properties that each household can buy in cities with excessive property price inflation.
As for the impact:
We think these measures will likely lead to another round of transaction volume decline in the coming few months (e.g., by 20-40% compared with the current weekly level), and should be able to stop the recent uptrend of property prices especially in Tier 1 cities. We are less confident that these measures are able to generate a significant fall in property prices in the short term. We sense from many officials that if property prices can remain stable (i.e., no increase) for several years, it would also serve the purpose of improving affordability. We increasingly feel that the current tightening measures may remain in place for very long time, possibly for years.
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