Shanghai imposes tougher rules on city's property market

BEIJING (Reuters): China's financial hub Shanghai will impose tougher regulations on its property market from Friday (Jan 22) in response to a heating up of its residential property market.

The new rules aim to stabilise land and property prices, increase housing supply, and reinforce supervision of the market, the Shanghai housing authority said in a statement.

Commercial banks will be advised to strictly control the growth rate of individual mortgages, avoid sudden spikes in lending, and prevent the funnelling of other loans such as consumer loans and business loans into the real estate market, the authority said.

The rules also set a tighter quota on how many houses certain groups of people can buy and raise the threshold for exemption of value-added tax in residential property transactions.

The tougher regulations, the first to be imposed by the biggest Chinese cities this year, are expected to take some heat out of the market and guide market expectations, said Lu Wenxi, analyst with property agency Centaline.

More curbs could be introduced in coming months if the market heats up "irrationally."

Shanghai's property market saw upswings in 2020 fuelled by a population influx and cheap credit. The city's 2020 transaction volumes of new and second-hand homes both hit nearly four-year highs, according to property consultancy E-House.

Home price fluctuations in the biggest cities could have a spillover effect to other cities, fuelling market bubbles and financial risks, state media Economic Daily said in a commentary on Friday, calling on localities to take heed.

"Local governments should not relax property policies because of the flare-up of the coronavirus epidemic and short-term slowdown of economic growth," it said.

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