Shenzhen’s property market has again headed north in defiance of the pandemic blues. Runaway real estate prices have further forced the Shenzhen authorities to impose tighter curbs on home purchases to rein in speculation. Zhou Mo reports from Shenzhen.

Shu Dan threw her hands up in frustration on learning last month she’s not qualified to buy a home in Shenzhen, where she has been an architect for three years. Her hopes of owning a roof over her head were again dashed by a recent change in the city’s property-purchase rules.

The 32-year-old had moved to Shenzhen from Beijing in 2017 after having worked in the capital city for seven years.

“I love Shenzhen and really want to spend my whole life here. But, it has now become so difficult for me to settle down in this metropolis,” she groaned.

The municipal government of Shenzhen has further tightened housing measures, stipulating that even for residents with a local hukou, or household registration, they will only be allowed to purchase an apartment provided the hukou has been issued for three years

Having seen Shenzhen’s property prices go through the roof in the past few months despite the coronavirus pandemic casting a shadow over the Chinese mainland’s economy, Shenzhen’s municipal authorities moved to rein in the frenzy.

The municipal government further tightened housing measures on July 15, stipulating that even for residents with a local hukou, or household registration, they will only be allowed to purchase an apartment provided the hukou has been issued for three years. At the same time, the holder must have paid social insurance or individual income taxes in Shenzhen consecutively for 36 months. Previously, residents would be eligible to buy a home once they’ve secured a local household registration.

For those without a hukou, they have to pay at least five years’ social insurance or individual income tax consecutively in the city to be eligible.

On the supply side, the value-added tax can only be exempted in a transaction if the seller has owned the apartment for at least five years — up from two years previously — making it increasingly difficult for homeowners to dispose of their properties.

The latest curbs came after Shenzhen’s average home prices topped the national list in June, with the city’s average prices having skyrocketed to almost 75,000 yuan (US$10,710) per square meter — a 14.37 percent surge from the end of last year, according to the China Real Estate Association.

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Shenzhen’s property prices have now surpassed Beijing’s by about 20 percent and Shanghai’s by 36 percent.

Shenzhen’s move is also in line with the central government’s housing policies. At a symposium on the nation’s real estate situation last month, Vice-Premier Han Zheng emphasized the need to stick to the government’s stance that “homes are for living in, not for speculation”.

He said the mainland would avoid using the property sector as a “short-term stimulus” for the economy, and would instead stick to the principle of adopting city-specific policies and tailoring housing regulations for different cities to ensure their sound and healthy development.

The latest cooling measures seem to have had the desired effect. According to Centaline Property, transactions of new residential properties in Shenzhen dropped by 8 percent in the week from July 13 to 19 — the first week after the new housing policies were rolled out — compared with the previous week.

Transactions involving pre-owned homes plunged by 48.7 percent on a weekly basis over the same period, according to the Shenzhen Real Estate Intermediary Association.

Zhang Dawei, chief analyst at Centaline Property, said the tightened policies have effectively dampened housing investment in Shenzhen and some investors are expected to quit the market.

The city’s housing market may see a period of adjustment if the rules concerning purchasing eligibility and loans are stringently enforced, he said.

Li Yujia, chief researcher at the Guangdong Housing Policy Research Center, reckoned that home transactions would drop significantly in the second half of this year, further dragging down prices. The market’s adjustment period could last up to eight months and total transactions could plummet by up to 70 percent, he predicted.

He believes the measures will have an impact on the market more in the short term while, for the long term, the market trend will still depend on economic fundamentals.

While many experts see the new polices as a boon for first-time homebuyers, some are skeptical about the actual effect on the market.

“Every time the government unveils new housing restrictions, prices go up,” noted Hu Chunyan, a foreign trade manager in Shenzhen. “By curbing sales, it only reduces the number of homes available in the market. The fundamental issue to be addressed is the shortage of supply.”

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The Shenzhen Planning and Natural Resources Bureau said the city plans to make available 293.2 hectares of residential land this year, accounting for nearly 25 percent of its total land supply for 2020 and double that of last year.

The municipal authorities have also vowed to supply 1.7 million new apartments by 2035.

Shenzhen is not the only mainland city that has moved to curb a runaway property market, encouraged by the gradual easing of the coronavirus shock.

On the heels of Shenzhen’s latest move, Dongguan, another city in Guangdong province, also tightened its housing policies, raising the threshold for people without a local hukou to buy properties and limiting sales of second-hand homes.

Contact the writer at sally@chinadailyhk.com