The Chinese Communist Party is regulating the nation’s real estate sector to ensure that families can afford housing.
The move comes days after the Chinese government unveiled new regulations for the nation’s $120 billion private tutoring industry, which authorities believe will decrease costs for families. Chinese parents routinely seek tutoring services throughout children’s primary and secondary education — by some estimates, between $17,400 and $43,500 per year — to prepare them for the National College Entrance Examination, which determines eligibility for undergraduate education.
As with the crackdown on tutoring, the real estate sanctions are an attempt to cut costs for families, who are now permitted to have up to three children — an increase from the previous two-child policy, which formerly ended the decades-long one-child policy.
Al Jazeera reports:
In recent days, China jacked up mortgage rates in a major city, vowed to accelerate the development of government subsidized rental housing, and moved to increase scrutiny on everything from financing of developers and newly-listed home prices to title transfers. Echoing Xi Jinping’s famous words that “housing is for living in and not for speculation,” Vice Premier Han Zheng added that the sector shouldn’t be used as a short-term tool to stimulate the economy.
While China has spent years trying to cool property prices, analysts say this round of crackdowns will be different. One clear signal came in Vice Premier Han’s comments on steering away from using real estate to provide short-term boosts for the economy.
Another signal came from the unusually large number of government entities that vowed recently to strengthen measures on everything from project development and home sales, to rental and property management services. Eight policy bodies said in a joint statement that they would step up penalties for misconduct. In the line of fire will be developers that default on debt repayments, delay deliveries on pre-sold homes or elicit negative news or market concerns.
“China’s property sector has been one of the biggest sources of discontent and the government is hell-bent on controlling prices so it doesn’t lead to social unrest,” Liao Ming of Prospect Avenue Capital told Al Jazeera. “The measures echo the policy curbs in education in that they are aimed at easing public angst against inequity.”
The housing regulations caused stock indices for the sector to plummet. The CSI 300 Real Estate Index dropped by over 6% on Monday — its lowest level since 2015. The Hang Seng Property Index also fell by more than 3%.