The soaring cost of housing in recent years has prompted the
government to step in.
Last month, the People's Bank of China (PBOC), China's central
bank, tightened its grip on property loans, barring commercial
banks from lowering interest rates on consumer housing loans to
below 0.9 percent of the PBOC's benchmark rates. It is also
encouraging them to raise down payments from 20 percent to 30
percent in cities where the property prices have been rising too
fast.
The move is just one of a combination of control measures
implemented by the government in an effort to ensure healthy
development of the real estate market.
Improve housing supply. The current housing
supply structure is irrational, with medium and low-cost
residential properties accounting for a comparatively small
proportion of the total. Investment in development of economy
housing shrank in 2004, accounting for just 4.6 percent of all such
investment and down from 6.1 percent a year earlier. In some areas,
construction of economy housing has been banned.
In contrast, there has been an increase in the supply of
non-residential buildings and high-end residences.
Authorities are to see to it that the construction of moderately
priced and economy housing increases while non-residential and
high-priced residential development is curtailed. Land and resource
departments at all levels are to stop supplying land for high-grade
villas.
Experts also suggest standardizing the rental market and
developing moderately priced residential properties to encourage
low and medium-income families to rent houses.
Adjust land supply. Some property developers
deliberately slow the pace of construction and sales and even hoard
land for speculation. This spurs consumers to purchase prematurely
or over their heads for fear of further price rises, thus worsening
the supply-demand imbalance.
While the government increases the supply of land for middle and
lower-end buyers, it will also encourage the development of unused
land to increase supply.
The Ministry of Construction will more closely manage the
issuance of building permits and control the pace of construction
to eliminate hoarding.
Land and resource departments will continue to sell commercial
land through such means as auctions to create an open, equitable
and fair market. Optimized and rational development of unused land
will increase both actual land supply and utilization
efficiency.
Some analysts suggest accelerating the setup of a land proceeds
fund, defining the proportion the government can take out to
prevent local governments from excessive reliance on land sales. A
portion of the fund should also be set aside as a stable housing
guarantee.
Curb speculation. Speculative investment in
housing has become rampant in some areas. Some institutions and
individuals use enormous amounts of bank loans for this purpose and
some foreign capital has flowed into the real estate market for
speculation, pushing housing prices up in some cities.
At present, property taxes are mainly levied on developers,
which transfer them into development costs. However, no taxes are
levied on housing ownership and transfer, providing incentives to
buy.
In addition to tightening its grip on loans, the government will
consider levying taxes on ownership and transfer to cool the buying
fever.
Restricting the influx of foreign capital and widening financing
channels into such areas as real estate investment trusts might
also weaken demand, according to some experts.
Curb local government price inflation. In many
places, land sales provide an important share of local government
revenue. Some local governments even work with property developers
to manipulate bids in order to sell the land at high prices.
The government will use economic, legal and administrative means
to curb this phenomenon.
The experts say that making local governments responsible for
real estate prices and assessing their job performance by whether
they can ensure an adequate supply of affordable housing is another
way to attack this issue while ensuring access to housing for
lower-income families.
(China.org.cn by Yuan Fang, April 8, 2005)