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If they do, any impact on the steel industry would be limited and short-term given the current tight credit situation and the oversupply in the property sector, market participants say.

Local authorities in Zhejiang province’s Hangzhou city and Hunan province’s Changsha city are considering relaxing the restrictions in response to the low sales transaction volumes in the first quarter, according to local media reports.

Weakening market
According to data released by the National Bureau of Statistics (NBS), the annual growth of new home sales was down 1.2% in floor space terms and 5% lower in monetary terms in the first two months of 2014.

Meanwhile, prices for commercial residential properties in 70 of China’s major medium-sized and large cities rose by only 0.28% month-on-month in February, according to the bureau. The growth rate was a 15-month low.

The cool market was attributed to banks’ stricter lending policy and a decline in domestic demand. Local media in late March reported that some property developers in Hangzhou, Beijing, Nanjing and Guangzhou were all offering to pay part of the down payments for buyers in order to boost sales. In other cities, property prices were cut.

Small impact

China’s steel market was cool to the possibility of the policy change, with market participants expecting the impact to be limited and short-term.

The house-buying restriction policy was introduced by the State Council in April 2010 to limit the number of houses purchased by local residents in more than 40 cities with soaring housing prices.

“If the policy change pushes property sales upwards, developers will be encouraged to increase housing start-up numbers, which would provide some support to the steel market,” a north China-based mill source said.

“I don’t think the government will remove the restriction in the big cities unless they are under pressure to meet economic targets,” a Beijing-based analyst said.

“Because of banks’ strict mortgage policy, there is very little money to put into real estate,” a steel trader in Hangzhou said.

“Only those who really need it will buy. Investment enthusiasm won’t be high,” he added.

“The removal of the restriction could lift market sentiment, which would encourage mills to produce. But an oversupplied steel market will nullify any positive effects,” a Hong Kong-based trader said.

An oversupply in the housing market also stands in the way of the steel market benefiting from the possible policy shift. “There are too many ghost towns comprising empty houses in China,” he said.