JI Wei, a recently married photographer in her 20s, fears her plans to sell her Beijing apartment and upgrade to one costing 6.15 million yuan (US$891,000) will collapse because of new measures aimed at reining in a soaring property market.

Beijing, home to about 22 million people, is on the frontline as China takes on speculators and tries to tame home prices. Chinese authorities fear surging prices are building up household debt, heightening banks’ credit risks, and fanning resentment as home affordability fades.

Apartments in Beijing on average are still cheaper than homes in Tokyo or London, but prices hit their 2016 peak in December and have continued to shatter records this year.

Second-hand homes in the capital averaged 63,082 yuan per square metre in March, according to Fang.com, a private provider of home price data — enough to value a modest 90 square meter apartment at US$824,850.

“Prices have surged almost 50 percent for a two-bedroom apartment from when I first started looking in October,” said Jiang Yuan, 33, who works for a big data company.

A previous round of restrictions cut the number of re-sale market deals in Beijing by 37 percent in the three months to end-December, but failed to stop prices rising.

In mid-March, the municipal government acted again — raising the minimum downpayment on a second home to 60 percent from 50 percent. On bigger homes, that minimum increases to 80 percent from 70 percent. They also suspended issuing individual mortgage loans of more than 25 years, effectively forcing borrowers to take on more expensive shorter loans. Buying a third property has already been banned.

And the definition of a second-home buyer has been broadened to include anyone who has a record of taking out a previous mortgage anywhere in China. Beijing has also curbed individuals buying new commercial property, and closed a loophole in buyers faking divorce to take advantage of first-home downpayment rates.

The number of new clients expressing interest to buy fell by nearly a third in the week following the latest curbs, and home viewings dropped 30.7 percent, according to data from Homelink, Beijing’s dominant real estate broker.

It may be too early to gauge the impact on prices, though. Fang.com data shows prices in Beijing’s re-sale market grew 1.07 percent in March, slower than February’s 3.3 percent increase. Official March home price data is due on April 18.

“The market will freeze under the new measures,” said Yi Xianrong, a professor at Qingdao University and former researcher at state think-tank the Chinese Academy of Social Sciences. “Sales may drop 90 percent.”

“It was like an ambush,” said Ji, the photographer.

The prospective buyer for Ji’s flat has now withdrawn, leaving her to find another buyer quickly or risk defaulting on her contract for the bigger home, and losing over half a million yuan in the deposit.

“I’m worried no one wants to buy my 50 square metre apartment anymore,” she says. “I’m not the only one affected by the new policies. I’m just one link in a long chain. If one person scraps the contract, the whole chain is likely to break.”

Local property agents reckon home upgraders like Ji make up around 80 percent of buyers in Beijing this year.

Some developers, too, are concerned about the impact on the market.

“This round of tightening is unprecedentedly harsh, and I’m very, very pessimistic about the market,” Sun Hongbin, chairman of Sunac China Holdings told financial magazine Caixin on March 28. “The risks are very high in our industry mainly because property prices are now limited by the government. If we buy land at current price levels, we will no doubt lose money.”

Beyond Beijing

While Ji frets, other cities are copying Beijing.

In just two weeks, at least 50 cities have emulated the capital, says Yan Yuejin, an analyst with E-House China R&D Institute, which tracks China’s housing policy. Those include smaller and less developed cities that had benefited from a speculator-driven boom, such as Zhuozhou and Langfang.

Last week, the housing ministry said Beijing’s tightening experience deserved to be studied by the rest of the country, state media reported. Beijing’s housing bureau representative Xu Jianyun was reported as saying the authorities would unswervingly contain upward price pressure.

While the measures are aimed at speculators, genuine buyers, too, are caught.

Jiang, the big data worker, has an apartment in the eastern port city of Qingdao, and wants to buy his first home in Beijing, where he works.

But the re-definition on second-home buyers means he faces paying at least a 60 percent downpayment instead of the 35 percent rate for first-home buyers in the capital.

“My budget is up to 2.2 million yuan for the downpayment for a two-bed flat,” Jiang says, “But with the new requirement, I’d have to pay 3.5 million yuan as a downpayment for my ideal home.”

However, Cao Zhounan, CEO and chairman of property developer Greentown China Holdings Ltd, while predicting nationwide sales volumes will drop, says the market “will increasingly cater to genuine buyers who will actually live in the homes they buy.”

The restrictions may, intentionally or not, also drive property investors to look beyond China’s capital.

In a recent phone sales pitch, a telemarketer eagerly promoted projects in cities near Beijing, including earthquake-prone Tangshan, which has a poor record on pollution.

“The tougher the stance that authorities take in first-tier cities, the greater the share of activity that will be pushed into second-tier and beyond,” Westpac said in a March 20 note.

That could take some heat off first-tier cities such as Beijing, Shanghai, Shenzhen and Guangzhou, and shift investors’ capital to smaller cities where restrictions are less severe.

On Monday, property agents in Xiongxian county in neighbouring Hebei province shut up shop hours after Beijing ordered a ban on property sales in an effort to curb a sudden housing boom triggered by plans for a new special economic zone.

Household mortgages, which accounted for 39 percent of China’s new loans last year, are not expected to pull back significantly.

Central bank governor Zhou Xiaochuan said last month that home loans will keep growing relatively rapidly this year, suggesting some tolerance for household debt. These loans are not just about property transactions: they impact a long industrial supply chain, he said.

The real estate sector accounted for 6.5 percent of China’s GDP growth last year, according to official data, but many say its overall contribution is much higher as the property market helps drive sectors from construction to banking and finance.