Experts: Curbs on homebuyers may go

Relaxations of home buying restrictions in Shanghai and Guangzhou, Guangdong province, point to broader easing across China's largest cities soon and potentially a full removal of such barriers, experts said on Tuesday.

It is now of immediate urgency for local authorities to abolish these restrictions as the recent policy rescue package may not fully address the property downturn, while delaying easing moves could weaken policy effectiveness, they said.

"I think all (homebuying) restrictions should be abolished immediately and Shanghai is showing the way," said Hong Hao, chief economist at GROW Investment Group.

They made the comments after Shanghai relaxed a series of rules on buying residential properties in the megacity on Monday, reducing the number of years that nonlocals were required to live in Shanghai before they could buy homes.

Purchasers only need to have resided in the city and paid taxes there for three years, instead of five previously. Families with more than one child are allowed to buy an additional home in Shanghai.

Credit policy was also eased as Shanghai lowered down payment ratios for first-time buyers to 20 percent from 30 percent, and to 35 percent from 50 percent for those buying second homes in core areas.

Guangzhou followed suit on Tuesday by allowing nonlocals who have paid taxes for six consecutive months in the provincial capital to purchase properties in core areas while lowering down payment ratios and removing mortgage loan interest rate minimums for first-time buyers.

Yan Yuejin, director of the Shanghai-based E-house China Research and Development Institution, said the other first-tier cities in China — Beijing and Guangdong's Shenzhen — are also likely to relax more restrictions on homebuying activity within the next week or two.

First-tier cities should accelerate their pace in adjusting home purchase policies, Yan said, as the destocking of housing inventories there has encountered new problems, while better addressing the situation would set an example for other cities around the country.

Shanghai's move follows Hangzhou, Zhejiang province and Xi'an, Shaanxi province, both of which fully removed homebuying restrictions early this month as official data showed that the year-on-year slump in home sales nationwide widened in April.

On May 17, the central government also rolled out a series of significant supportive policies, including lifting the national lower limit for personal mortgage loan interest rates and encouraging State-owned enterprises to buy up vacant real estate for affordable housing purposes.

"Despite the supportive measures on May 17, cautious sentiment regarding the real estate market has not been fully dispelled, meaning that the property downturn could continue, further affect investment and economic growth, and potentially even destabilize the financial sector," said Yang Haiping, a researcher at the Central University of Finance and Economics' Institute of Securities and Futures.

With recent policy moves having shown policymakers' clear intentions to improve property market sentiment, Yang said easing or even removing restrictions on homebuying in first-tier cities may be the most potent policy to achieve such an outcome.

"Let the market decide who should buy what. The housing sector will benefit from it," Hong said. He added that it remains to be seen whether recent measures to shore up the property market will be enough to reverse the trend.

"It's still early days," Hong said.

As the latest policy signal to prevent any systemic risks arising from the real estate sector, the National Financial Regulatory Administration said on Tuesday that it will further leverage the coordination mechanism for property financing to meet the reasonable financing needs of enterprises in the sector.