Wuhan eases limits on home purchases

Wuhan, capital of Hubei province in Central China, has eased purchase restrictions targeting the housing market by allowing families to buy an extra apartment in the city — a watershed move likely to be followed by more cities to encourage residential property consumption, industry experts said on Tuesday.

Wuhan announced on Monday a package of measures to stabilize its economy including granting families authorization to buy an additional flat in the city.

Under the new regulation, local households can own up to three residential apartments, while non-local families can have two.

Li Yujia, chief researcher at the Guangdong Planning Institute's residential policy research center, said the relaxation on home purchases is in line with the central government's guidance of taking measures in accordance with the specific conditions of individual cities.

Li said Wuhan used to rank within the top three of second-tier cities in both land supply and home transactions, but the city's new home transactions slumped 40.3 percent in 2022, and its home price index has been falling for 16 consecutive months.

"About 80 percent of Hubei province's non-locals are living and working in Wuhan, and they will become an important force in stabilizing the local housing market after the relaxation," said Li.

Yan Yuejin, director of the Shanghai-based E-house China Research and Development Institution, called the policy a benchmark practice in fine-tuning home purchases after the central bank allowed cities to decide if they will retain, reduce or remove local lower limits for interest rates on first-home loans in phases, as long as new home prices dropped both month-on-month and year-on-year for three months.

"Wuhan's policy has provided a new direction for other cities eager to support self-use housing demand and boost housing consumption," Yan said.

Harbin, capital of Heilongjiang province, also issued a 20-item guideline to stabilize its housing market on the same day, the Securities Times reported.

The proposed measures include supporting reasonable home purchase requirements and providing financial support like home-buying subsidies to buyers.

Many provinces and cities have included home consumption considerations in their economic development plans for 2023, showing the importance of the property sector to regional economic development.

In fact, all second-tier cities with GDPs rated in the Top 10 eased their home purchase restrictions to a certain extent last year. Some cities went further, like Guangdong province's Foshan and Dongguan that scrapped their home purchase limits, according to calculations by China Times.

"It is expected that more hot spot second-tier cities will roll out similar policies as Wuhan did, and only first-tier cities may maintain home purchase restrictions," said Guan Rongxue, a senior analyst with the Zhuge Real Estate Data Research Center.

The purchase restrictions are a response to insufficient supply, because the demand surplus will drive up home prices, said Song Ding, a researcher with the China Development Institute.

"As the fundamentals of the property sector have changed, measures used to prevent outrageous speculation and excessive home price growth should be changed as well. Therefore, it is only a matter of time before more cities finally terminate restrictions targeting the housing market," Song said.