Since the end of June China has moved to clamp down further on housing speculation as the government shows its determination to enforce President Xi Jinping’s vow at last year’s party congress that, “homes are for living, not for flipping.”
Officials from the Ministry of Housing and Urban-Rural Development (MOHURD), along with six other departments have launched inspection tours in 30 cities aimed at stamping out housing speculation and ensuring that home prices stop rising.
Doing Away With Chaos in the Interests of the Masses
The bureacratic enforcement campaign follows an announcement by MOHURD on June 28th saying that, “In response to recent chaos in the real estate market, and in order to crack down on violations of the interests of the masses,” the housing regulator would conduct “special management of market chaos” from July 1st through the end of the year.
In its statement MOHURD explained that the new campaign would focus on eliminating real estate speculation, wiping out unlicensed real estate agents and intermediaries, stopping illicit property developers and doing away with fake real estate advertisements and information.
In housing sales, the ministry intends to target fake down payments for homes, illegal sales by developers, covert price increases such as required furniture or decoration purchases, and illicit use of provident funds.
Outlawing Corporate Home Purchases
While China has long had measures in place limiting home purchases or restricting mortgage availability per household the new campaign aims to close loopholes and stamp out illicit credit sources.
On July 3rd the Shanghai Commission of Housing and Urban-Rural Development, banned companies with less than five years of operations from buying homes in the city, closing a workaround that had allowed prospective buyers to make purchases by setting up companies in the city.
The new measure, which took immediately also required corporate home buyers to have paid at least RMB 1 million in tax. In a statement the Shanghai branch of MOHURD said that the city’s new rule was “aimed at better policing corporate purchases of properties.” In late June Hangzhou had suspended all corporate home purchases.
Chongqing Hikes Taxes on Developers
In its version of the campaign, the Chongqing government increased taxes on real estate enterprises in the southwestern China metropolis, according to an account in the Economic Information Daily.
For real estate developers selling unfinished projects, tax rates would be increased from 15 percent to 20 percent, while VAT on land for non-subsidised residential, commercial and parking projects would be increased from 2 percent to 3.5 percent.
Cities Target Rule-Breakers
With the central government emphasising the market crackdown, cities and provinces have taken their own approaches to enforcement.
In the Hainan province capital of Haikou 13 individuals have been slapped with five year bans from making home purchases and three real estate companies have been closed for violations, according to an account in the Securities Times, while across the island in Sanya, six companies have been cited for violations while four sales offices have been forced to close.
In the Yunnan province resort city of Xishuangbanna, 89 property agencies have been closed already and some 210 individuals have been forbidden to act as agents.
Campaign Spreads Beyond Original Cities
From the time of the MOHURD announcement through July 10th, officials had already begun conducting inspections in 22 provinces and municipalities, including Shaanxi, Fujian, Guangdong, Henan and Zhejiang at the provincial level.
Among the 30 cities included in the ministry’s June 28th target list, Changsha, Chongqing, Wuhan, Shanghai, Hangzhou, Kunming, Haikou, Ningbo, Foshan and Xiamen had already begun inspections. Beyond the original scope of MOHURD’s original announcement, the cities of Xishuangbanna, Sanya, Dali, Tangshan, Zaozhuang, Linfen and Ningde had also begun taking part in the latest round of special enforcement.