Beijing maps out ambitious home price control target

Beijing is determined to stabilize or lower new home prices in 2011 with what is considered the most ambitious housing price control target among those issued by more than 40 Chinese cities.

The municipal government will keep prices of new homes, mainly apartments smaller than 90 square meters, steady or declining this year, according to a statement posted on its website Tuesday night.

The target was issued after the State Council, China's Cabinet, required local governments to establish new home price control targets based on economic growth and increases in disposable income, and make them public in the first quarter of 2011.

Many cities said they would limit the rise in new home prices to around 10 percent in 2011, with some others targeting 15 percent or higher.

For instance, Taiyuan City, capital of northern Shanxi Province, said that the increase in new home prices this year would not exceed the growth of gross domestic product (GDP) and the average per capita disposable income, the latter estimated at about 10 percent.

TOUGH STANCE

Beijing, however, did not link its home price control target with GDP and disposable income growth.

While Beijing predicts an eight percent growth in GDP and a seven percent increase in disposable income of urban and rural residents this year, it eyes declines in new home prices.

Pan Shiyi, a Chinese real estate tycoon, said in a blog entry on Wednesday that Beijing was the first city that had targeted a price decline, which was "utterly unexpected".

Beijing's bold move demonstrated the capital city's resolve in lowering skyrocketing high home prices to a reasonable level, said Mou Zengbin, director of Beijing Yiju Real Estate Research Institute.

"Beijing's control target could squeeze bubbles in some excessively costly housing projects. Ordinary people will applaud it," said Zhu Zhongyi, deputy director of China Real Estate Association.

Su Yuan, a woman who migrated to Beijing from the northwestern Xinjiang region several years ago, was one of the potential home buyers who felt relieved after learning the news.

"I finally see the word 'decline.' It is also the hope for my buying a home here," Su said.

DIFFICULT MISSION

However, the toughest target would be the most difficult to achieve, Mou said.

Last year, prices of houses sold in Beijing increased by 11.5 percent year on year, according to the Beijing Municipal Bureau of Statistics. The home price increase in Beijing also continued into the first two months of 2011.

"The home price in Beijing has been surging for years. The hard-line attitude of the government may prevent it from skyrocketing, but probably not enough to bring it down," said Chen Yunfeng, secretary-general of China Federation of Real Estate Brokers, adding that the city's land supplies still fall short of demand.

To achieve the target, the government said it would enhance supplies of indemnificatory apartments by providing about 200,000 low-rent housing and public rental housing units.

The government would secure land supplies, 70 percent of which would be used to build indemnificatory apartments and small and medium-sized commodity apartments, said Chen Zhi, deputy secretary-general of Beijing Real Estate Association.

Also, it would continue to counter speculation by strictly implementing differentiated credit, tax policies and the latest house purchase limits, Chen added.

In February, the municipal government rolled out new rules that prohibit Beijing families from owning two or more apartments and non-Beijing registered families that own one or more apartment from buying more homes.

Non-Beijing registered families who have no residence permit or documents certifying that members of the family have been paying social security or income tax for five straight years, are also banned from buying apartments.

Beijing families who own just one apartment can only buy one more apartment, according to the new rules.

In fact, the city's housing market had shown signs of a price drop, said Chen Yucheng, deputy general manger of the Beijing office of the Hong Kong-based Kinderly Real Estate Group.

A major housing project developed by the Sino-Ocean Land, a Chinese real estate giant, had seen a significant price decline, Chen said, adding that prices of many new homes were lower than expected.

"Decline is the trend," Chen said.

In early March, Chinese Premier Wen Jiabao reiterated that the government aimed to "genuinely stabilize housing prices and meet the reasonable demands of residents for housing."

He made the remarks when delivering a government work report at the annual session of the National People's Congress, the top legislature.