SHANGHAI -- In an effort to cool the resurgent property market, two of China's biggest cities announced over the weekend that they would put in place a series of new restrictions and penalties on housing sales.
In the nation's capital, the Beijing municipal government said that unmarried individuals would now be allowed to purchase only one residence. The city also increased the minimum down payment for buyers of a second home and imposed a 20 percent capital gains tax on owners' selling a residence.
In Shanghai, an identical capital gains tax was announced and took immediate effect, and city officials pledged to install and enforce other measures aimed at stabilizing housing prices. The stiffer capital gains taxes take the place of a 1 percent to 2 percent transaction tax that was previously assessed on the final price of the property being sold.
The announcements came weeks after China's State Council, or cabinet, said the government would take stronger action to ensure that property prices do not continue to soar, fueling what many analysts believe is a real estate bubble that could seriously damage the economy and exacerbate social tensions between the rich and the poor.
Property prices in China have been rising sharply in the last year, with housing prices in many big cities up an average of 3.1 percent in February, according to a government survey. In many cities, the cost of buying a new home has doubled in the last five years.
In a country where investment options can be limited, property is considered a good store of value.
Michael Pettis, who teaches finance at Peking University and is a senior associate at the Carnegie Endowment for International Peace, said China was facing challenges that many other emerging markets were struggling with: It is awash in too much cash and credit.
"China has a liquidity problem, and so it's not clear to me changing the tax structure or fiddling around the edges addresses the real problem," Mr. Pettis said. "Raising interest rates would be the single biggest thing they could do. But they also need to stop credit and monetary growth."
Some of the new measures detailed Saturday had been anticipated after the State Council's announcement in early March. The threat of tougher rules had set off a nationwide rush to sell properties before city governments detailed the specific measures they would take, as well as their starting dates.
Shanghai and other big cities had even seen a surge in the number of divorce filings at marriage bureaus, with many couples openly admitting that they were filing for divorce simply to get around property rules and that they would later remarry.
It was clear in the announcements that the city governments were trying to close that loophole.
China's state-run news media also said over the weekend that the central government was planning to introduce a unified national property registration system by the end of 2014, which could eventually make it possible to impose an annual property tax on households -- yet another way the authorities expect to fight housing speculation and fend off bubbles.
Although Chinese cities do not impose annual taxes on holding residential properties, the government has rolled out detailed measures virtually every year for the past decade in an effort to penalize speculation in the housing market.
The efforts have often been effective at temporarily holding down prices, but the market usually roars back as investors, homeowners -- and even banks and property agents -- identify loopholes in the restrictions, analysts say.
Because China's booming economy is tied so closely to the property market -- and because the property market is a major source of income for banks, which issue mortgages, and local governments, which profit from land sales -- any strong government measures to rein in the sector have the potential to affect the larger economy.
In Shanghai, a city of about 22 million, banks are no longer allowed to offer loans to residents buying a third home; those seeking a second mortgage are now expected to make larger down payments and to pay higher mortgage rates. Shanghai officials also said they would make it tougher for foreigners, people from other cities in China and divorced individuals to buy homes, a clear hint that they intended to counter attempts by local residents to seek divorces in order to circumvent some restrictions.
The authorities in Beijing and Shanghai also promised to build more moderately priced residences. This year, Beijing said it planned to build 70,000 units of such housing; Shanghai said it expected to build 10,000 units.
"The central government is feeling the heat and not just for social reasons," Joe Zhou, a property analyst at Société Générale, said in a report released last week. He said a push by Prime Minister Li Keqiang, who took office in March, to promote urbanization as a new key growth driver "only adds to the urgency to cap property prices, as the strategy implicitly requires housing prices to be within the reach of future migrants whose purchasing power is likely to be more limited than those who have already earned their way into the urban area."world
This article originally appeared in The New York Times.