If you are looking at the China real estate market for a significant span of time, you might have likely noted that there prevails a drastic ups and down in the housing market.
One day you may find the market is on ebbs, with the housing prices in a few cities hitting almost an unbelievable heights, and within a short amount of time, then the price of housing sudden begins to drop down or top out and it seems to be like as if at last the bubble has burst.
But, which may not be the reality, within a two or so quarter later of such market scenario, prices starts increasing or decreasing and as usual the cycle start all over again.
Home Purchasing Restrictions
Home Purchasing Restrictions, generally referred as HPRs is similar to the brake of a truck that is rolling downhill. HPRs is used as a tool to halt the housing market from the runaway momentum by manipulating the buyer side through making purchase of homes less financially attractive and more restrictive.
When the housing market scenario gets equalized, again it get a slightly cooler than overall economy prefers to bear, the brakes are again let up on, restrictions on home purchases are eased, and naturally buyers show interest to buy new homes, and finally the real estate housing market in China regains momentum.
How they frame HPRs?
Restriction regarding the count of house
At times of China’s housing market getting too hot in specific cities, one among the HPRs tools utilized by the government is imposing restriction on how many home buyers can get hold of. Generally, there are distinct standards for non-locals and locals.
In order to regulate the housing market in China, the government makes use of another tool by which they regulate on how much a homebuyer must pay as a down payment prior financing becomes available.
In any given city, on the basis of how the local market is running, compulsory down payments may vary from the range of 20% to 35% for those who are buying home for the first time and for subsequent home buyers it may vary from 60% to 80%. For those who are buying three or more homes may even need to pay the entire amount as down payment.
In china, there is no yearly property taxes being levied on the people, the government considers their cut at the time while abodes are sold and such levied tax amount will really be huge. Property tax includes value-added real estate tax, real estate transaction tax, land value-added tax, property tax, education tax, property transfer tax and so on. On the basis of the blow of winds in the market, even government agencies will increase and decrease the property tax of the homebuyer.
Municipal governments also encourages and discourages the housing market activity through controlling the count of urban construction land they make available for constructing residential space, which will directly impact on the supply of new housing that hits the market. When there is too much availability of unsold inventory, restrictions on land sales will be higher, and when the inventory is on control, land sales again get speed up.
Apart from framing policies and instituting tax rates that creates an impact in the China’s housing market, municipalities can manage decrees that can almost cap the pricing of the houses.