Shanghai eases definition of 'ordinary' apartments

The Shanghai municipal government relaxed definitions for ordinary homes on Thursday, the first revision since March 2012, which will allow more home buyers to enjoy preferential mortgages.

An apartment located within the city's Inner Ring Road and priced at less than 4.5 million yuan ($734,682) will be defined as an ordinary house, according to the circular issued by the Shanghai municipal government. The price limit set in the new standard is about 36 percent higher than in the old standard.

Homes located between the Inner Ring and the Outer Ring and priced at less than 3.1 million yuan (about 55 percent higher than the old standard), and those located outside the Outer Ring and priced less than 2.3 million yuan ( 43 percent higher than the old standard) are now defined as ordinary houses, according to the new rules.

The new standards will double the number of apartments that can be classified as ordinary homes in Shanghai, said a research report published by Dooioo Property, a Shanghai-based property services provider.

About 61 percent of the existing homes in Shanghai will now come under the ordinary home category, the Dooioo report said. The circular said the new standards will come into effect starting Nov 20.

During the past two years the steady growth in real estate prices had ruled out opportunities for buyers to gain from preferential loan rates with up to 10 percent discounts.

According to data published by the Shanghai Real Estate Trading Center, the average prices of homes between Inner Ring and Outer Ring was 42,000 yuan per square meter in the first three quarters of 2014. The average price of homes outside the Outer Ring during the same period was 19,000 yuan per sq m.

"Under the old standards, only some buyers could get the discounted rates in Shanghai," said Wu Huimin, director of residential property at real estate company DTZ East China.

The new standards will benefit buyers of the lower-priced smaller homes and will have little impact on the high-end residence market, said Wu.

Most of the home buyers, however, preferred to "wait and see" if the government will relax the policies further.

"The lifting of limits on home loans in October and the new standards for ordinary homes are signals that the property market policies are being relaxed. I think I will wait for another month to see if more favorable policies will be introduced by the end of 2014," said Zhai Limin, a 34-year-old prospective home buyer in Shanghai.

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