Non-locals have to pay income tax for 5 years before purchasing home

BEIJING - The Beijing municipal government released a package of rules on Wednesday to restrict home purchases in the capital and rein in soaring property prices.

The package follows the central government's property tightening measures announced in January to cool the market.

Under the rules, non-Beijing residents must have paid their monthly social security contribution or income tax for five consecutive years before they are eligible to buy their first apartment in the city.

The rules also state that people with Beijing residence permits will be limited to two properties, and eligible non-locals will be allowed to buy only one.

Pan Shiyi, chairman of developer SOHO China, said the rules will have a major impact on the housing market.

"It will not only weigh down Beijing's property prices but also affect the lives of non-locals living and working in the city," Pan said.

Many experts believe the five-year social security and income-tax payment requirement for non-locals is the strictest among cities that have launched home-purchase restriction policies.

"The rules will become a wind vane for other cities. They have shown the municipal government's resolve to curb rising property prices," said Lin Lei, marketing chief of Century 21st, a US-listed real estate brokerage company.

If the policies are implemented soundly, home purchases will further decline, Lin noted.

The rules, in addition to the planned increase in the supply of welfare housing, will probably turn the booming housing market sour this year, she added.

Statistics from the Beijing Property Transaction website show that property sales in Beijing dropped 60 percent in the first week after the Spring Festival holidays compared to the week prior to the holidays.

Li Daokui, an adviser to the People's Bank of China, said the effect of the new rules will soon become evident.

"Beijing's property market will probably run into a deadlock. Transactions will fall but prices will remain high until property developers suffer a severe cash-flow shortage," Li said in his micro blog.

China has been cracking down on property bubbles, with around 30 cities imposing restrictions on home purchases.

The government last month raised the minimum down payment for second-home purchases from 50 percent to 60 percent. Property taxes were also introduced in Shanghai and Chongqing.

Wang Gehong, president of Beijing GrandChina Real Estate Fund, said all the home-purchase restrictions rolled out so far are temporary, and "aim to curb speculation".

They will help the government gain more time to boost supply, especially of affordable housing, he said.

Property prices nationwide registered their smallest year-on-year gains in December, after peaking at 12.8 percent in April. Prices in 70 major cities rose 6.4 percent in December from a year earlier, compared to a 7.7-percent increase in November, according to the National Bureau of Statistics (NBS).

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Despite the slowing annual growth rate, property prices in the 70 cities posted their fourth straight month-on-month rise, with the gain in December standing at 0.3 percent.

The NBS will release the country's property price index on Friday, the first time it will incorporate a revised method of calculation.

The new method will enable the bureau to make better use of data from market watchers, instead of basing calculations on data provided by developers.