Economy

Chinese government gears up for cooling housing market

(Xinhua)
Updated: 2010-09-30 21:01

BEIJING - Experts said on Thursday that the latest measures taken by the Chinese government to cool the property market would produce tangible results, and stricter policies were expected.

Related readings:  Hoarding of land tackled in new rules on property  91% unsatisfied with home price: Survey  High home prices may hinder urbanization process: Economist  VP urges rental housing for low-income people

"The new policies represent the government's tougher stance in curbing excessive housing price rises," said Wang Jun, a researcher with the China Center for International Economic Exchanges (CCIEE), a government think tank set up under the National Development and Reform Commission (NDRC).

These new measures are part of a concerted campaign involving eight ministries and include providing more support for builders and owners of low-income housing while holding provincial governments accountable for failing to contain home price inflation and providing affordable housing to the poor.

Wang said the timing of announcing these measures was an indication that the central government had decided to redouble its efforts in response to the signs of a rebounding housing market, as seen in recent weeks.

Earlier this month, official statistics showed that property prices in China's 70 major cities rose 9.3 percent in August, year-on-year, but were unchanged from those of July, which also did not decline from June.

As housing prices in major cities were soaring beyond the reach of ordinary earners, the government in April introduced an array of policies, including higher down payments and an end to mortgage discounts, to dampen speculative demand, and issued orders urging local governments to build more affordable housing in a bid to increase the supply for low-income people.

"To some extent, these policies have helped in boosting the supply of affordable homes and curbing the speculative demand, but the effects have been limited due to weak enforcement by many local governments," said Wang.

Wang pointed to a policy statement jointly issued by the Ministry of Housing and Urban-Rural Development, Ministry of Land and Resources and Ministry of Supervision on Wednesday as an effective measure by the central government to force local governments to enforce the policies.

"Provincial governments would have to take responsibility if they fail to curb home price rises and provide more affordable housing," the statement said.

Providing more affordable homes was a key move in cooling down the property market as they sought to reduce the prices of commercial housing and meet the demand of low-income people, said Wang.

"The central government had set a quantitative goal for each provincial government to build affordable houses, but a majority of provinces fell far short of reaching these goals because they would rather sell the land to commercial developers for handsome profits," he said.

Yi Xianrong, a researcher with the Institute of Finance and banking of the Chinese Academy of Social Sciences, also expects this measure to exert effects. "The accountability system would serve as an alarm bell for local governments who have been lukewarm towards building low-income homes," he said.

The accountability system came one day after the government adopted a preferential policy for low-income home builders and buyers.

On Tuesday, China's state tax office and finance ministry said they would exempt a segment of the low-income housing sector from taxes in a drive to boost the supply of affordable housing.

Specifically, builders and owners of "public rent homes" would be exempt from the land use tax, stamp tax, deed tax and value-added tax for the next three years.

On the demand side, the central bank and the banking regulator announced, in a statement on Wednesday, that they had taken further steps to cool the speculative demands, ordering banks not to provide loans for third home purchases and above.

The statement also said that down payments on all home purchases would now have to be at least 30 percent.

"There are a lot of people in the market who believe that home prices would never fall, and even if that happens, the government would come to rescue. These new measures showed this expectation to be wrong," Yi said.

Both Yi and Wang expected more and stricter policies would be employed by the central government to cool down the property marker, including the long-awaited expansion of the property tax from some cities to the whole of China.