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Quitting the Quota

HONG KONG – On March 1, China’s State Council announced a new batch of restrictions aimed at reining in property prices by curbing speculative demand. The measures include tighter limits on home purchases by non-locals in cities with excessive price gains, a reinforced 20% capital-gains tax, mandatory 70% down payments, and a 30% benchmark interest-rate premium for second mortgages.

While the previous round of housing-sector restrictions, implemented less than two years ago, dampened market sentiment temporarily, it failed to curb rising property prices. Likewise, although the latest measures might have some impact, cooling China’s turbulent property market – which relies on cheap credit – in the long term will require addressing underlying monetary-policy weaknesses.