Richest cities lift property purchase limits

The city of Ningbo eased home buying restrictions on Wednesday after two other cites in the affluent Yangtze River Delta lifted property purchase limits earlier this week.

The three cities witnessed a sales slump as prices surged, the economy slowed and credit tightened, dampening market demand in one of China's richest regions where property speculation had previously meant the cost of homes in regional cities there were comparable to those in Beijing and Shanghai.

The lulling enthusiasm for real estate not only reduced fiscal revenues of land sales but also worsened financial risks in Zhejiang Province, which reported China's highest ratio of non-performing loans.

Shanghai home buyers can also obtain mortgage rate discounts that were unavailable in previous months. The Agricultural Bank of China, one of China's big four banks, offers a 5 percent discount on interest rates to customers borrowing at least 2 million yuan for their first home.

So far, around 20 cities, mostly second- and third-tier ones where inventories are high, have lifted or eased bans on ownership of more than one home, imposed in early 2011 as a tool to cool the property market.

Back then, more than 40 cities made use of the limits along with other measures, including higher mortgage rates and bigger downpayments on second homes. Three years ago, high home prices were among the top complaints of urban residents.

The central government has not indicated any shift in nationwide property policy. Instead, quicker reforms, infrastructure construction, and loosening credit for the Main Street economy have been used to offset impacts of the real estate slowdown.

According to the National Bureau of Statistics, new home prices in 55 of a sample of 70 major cities showed month-on-month drops in June, compared with 35 in May. Only eight cities saw month-on-month gains, down from 15 in May.

The average home price in the 70 cities slipped 0.47 percent from the previous month, marking a second consecutive monthly drop following a 0.15-percent fall in May.

However, on a year-on-year basis, new home prices in most cities are still higher than a year ago, with only Wenzhou City seeing a price drop in June.

"We continue to look for the decline in house prices to support a further recovery in home sales and contain the slowdown in property investment in H2," wrote Barclays chief China economist Chang Jian in a note.

Lately, market sentiment of the Chinese economy has been on the rise as more upbeat signs, including strong PMI and higher GDP growth, have begun to restore investors' confidence.

Both the domestic stock market and yuan exchange rate have showed recovery.