New moves to rein in the property market

Shanghai announced a new round of rein-in policies on Wednesday in its continued effort to maintain a stable and healthy housing market, which has shown signs of overheating over the past year despite the pandemic.

Owners of new homes who have been "prioritized" to purchase a property will only be allowed to sell it five years after their purchase, according to a statement issued by the city's housing and urban-rural construction and management commission, the local urban planning and natural resources bureau and the city's housing administration bureau.

The latest move comes about six weeks after the city introduced a number of measures to curb property speculation.

In a statement on January 21, the city said it would further optimize its “lucky draw” mechanism implemented in new home sales, saying that people owning no homes would be prioritized to participate in the draw.

Under the new scheme, first implemented in early February at three new residential projects in the city's Minhang, Baoshan and Jiading districts, interested buyers were asked to calculate their points first to see if they qualified for the lucky draw. 

For example, people having a Shanghai hukou, or permanent residence permit, married, owning no homes at present and who hadn’t bought a home in Shanghai in the past five years, would receive the highest points, which would then give them a priority to participate in the draw. Other factors, such as their length of stay in Shanghai, will also be taken into calculation.

"Shanghai is not the first Chinese city to introduce such a policy which in my opinion should be effective to curb housing speculation," said Vincent Lu, a senior analyst with a major brokerage chain in the city, referring to similar moves in Hangzhou in neighbouring Zhejiang Province. "By introducing two major batches of tightening policies during such a short period of time, the local government has shown its determination to keep the housing market in check."

Apart from the five-year ban, the city reiterated in the statement that it will keep strengthening its land supply management and further increase land supply for residential property development. Residential parcels designated solely for leasing purposes, meanwhile, will be planned separately from now on by the land watchdog while "irrational" land bidding with high premiums will be prohibited.

The city will also strictly implement the price registration of new homes to avoid overpricing of real estate projects by developers.

In January, the local government stepped up its efforts to crack down on those seeking access to home purchases or mortgage loans through fake divorces and imposed a capital gains tax on the total sale price of a property if sold within five years of purchase, up from the previous two-year barrier.