OREANDA-NEWS. China's central government will continue to focus on clearing housing inventories, especially in lower-tier cities, while implementing city-specific policies to tackle sharp housing price increases in higher-tier cities or cities with low inventories, Fitch Ratings says. These city-specific policies could seek to supress land prices or control demand from investors. Fitch expects China's central and local governments to continue to introduce or modify policies to cool the overheated property market.

Several cities have introduced price caps in government land auctions to limit home price increases. For example, bids for land at auction in Hangzhou cannot exceed 150% of the opening bid. For Nanjing and Suzhou, when bids reach the caps set by the local government, a lottery or other mechanism will be used to determine the winner of the land parcel. Local governments have also been putting up for land for sale to increase supply in the short to medium term; local governments in Jinan, Nanjing and Hefei announced new land sales and home purchase restrictions at the same time.

Sixteen cities have home purchase restrictions in place now, compared with only Shenzhen and Shanghai six months ago, a sign of how quickly prices have increased in cities where supply-demand dynamics are favourable. Fitch expects purchase restrictions to continue in these cities to control demand from investors and give priority to owner-occupiers. Other cities with strong property demand, low inventory levels, growing populations and rapid increase on housing prices may also introduce home purchase curbs to tame prices.

Beijing, Chengdu, Zhengzhou, Tianjin, Nanjing, Jinan, Hefei, Wuhan, Fuzhou, Wuxi and Kunshan announced its home purchase restrictions earlier this week, while Hangzhou, Xiamen and Suzhou added them in August-September 2016. The curbs were introduced in Shanghai and Shenzhen in March 2016.