Shanghai decides to ease property restriction on second homes

China’s financial centre Shanghai has eased home purchase restrictions to allow a broader pool of buyers to purchase a second property.

The city has decided to allow residence permit holders who have lived in the city for at least three years to buy a second home, according to a source at the city’s housing regulator.

It previously limited the second home option to locals, or those born in the city or who worked for an extended period of time and were officially recognised as locals, without specifying guidelines for non locals.

‘This is certainly a positive easing measure. But the easing by the local government doesn’t mean the central government will loosen its property controls,’ explained Jack Gong, an analyst at Jefferies Group.

Officials from Shanghai and Beijing said earlier this year that they plan to keep their home purchase restrictions this year. China will not waver on its real estate controls and efforts to bring prices down to a reasonable level, Premier Wen Jiabao said earlier this month.

However, with sales and prices falling the latest move could boost home sales in Shanghai by 20 to 30%, according to Jefferies.

The report comes a week after the eastern city of Wuhu reversed a decision to waive a deed tax and subsidise some purchases.

It is not clear if the Shanghai move will hold because the restriction on home purchases has been described as critical to avoid a real estate bubble.

About 671,000 residents in the city of 20 million were issued residence permits as of March 2009, China Business News reported, citing the local statistics bureau. Residents with at least a year of tax records in the city are allowed to buy one home.