What the rapid housing market recovery means for China

Further property restrictions could be imposed.

Moody's Analytics' Alistair Chan noted that the quick recovery in China's housing market appears to have surprised the central government, which announced a 20% tax on second home sale profits in early March, causing a scramble across the country as people rushed to register sold houses before the deadline (or get divorced to evade the second home restriction).

"Local governments have announced their economic growth forecasts and they all (except for Shanghai) are above the central government's 7.5% target. Housing plays a part. The Ministry of Finance reckons that local government revenues are rising 'too fast' because of greater property transactions," said Chan.

Local government revenues rose 12.9% y/y in the first two  months of the year, while central government revenues rose a relatively paltry 7.2%, partly due to income tax cuts.

"If the property market continues to rise, further restrictions have been promised," warned Chan.