Looking East Originally uploaded by China Chas. BEIJING will adjust lending and other policies to cope with surging real estate prices, reacting to a potentially destabilizing scarcity of affordable housing and rising financial risks from property speculation.
China’s top leaders met Wednesday and ordered stricter enforcement of curbs on lending and tax policies aimed at discouraging property speculation, State media reported Thursday.
The government has been seeking for nearly two years to rein in excess investment in construction of upscale and luxury housing, warning that a speculative surge in prices could lead to financial problems.
Meanwhile, conflicts over housing have prompted sporadic protests, making real estate a sensitive political issue.
Lending policies will be adjusted to curb demand, the official newspaper People’s Daily cited Premier Wen Jiabao as saying after a Cabinet meeting. The government will also restrict land for expensive housing and offer easier credit for low-cost homes.
The central bank recently raised its one-year benchmark lending rate by 27 base points to 5.85 percent, signaling its desire to cool lending.
Last year, some cities, including Shenzhen, imposed a business tax on sales of property less than two years after purchase. Local governments nationwide were ordered to more strictly control land use rights, to limit credit for property deals, and limit real estate developers’ profits to a maximum of 3 percent.
Property prices rebounded this year as the impact of new taxes and higher mortgage rates imposed in 2005 wane. Home prices in Shenzhen have risen about 25 percent in the first quarter of this year over the same period last year. Average home prices in Beijing jumped 14.8 percent, and those in China’s northeastern Dalian City rose by more than 10 percent, government data showed.
Despite some progress in curbing investments in the sector, prices in some big cities have continued to rise too quickly, the newspaper said, adding that the industry had a “bad supply structure and messy market rules.”
“The government tried to rein in property prices last year and obviously this goal has not been met,” said Zhao Qiang, an analyst at China Everbright Securities Co. in Shanghai. “Prices will continue to soar if nothing is done.”
The government will use tax measures and boost supervision to curb the amount of land used to develop luxury homes, a CCTV report also said Wednesday.
“Local governments will probably issue measures, including raising down payments for purchase of a second home to at least 40 percent of its value from a minimum 20 percent” after the Central Government’s announcement, said Li Huiyong, an economic analyst at Shenyin Wanguo Research and Consulting Co. in Shanghai.
The government aims to cool the market because “soaring” prices have become a focus of public complaints, Zhu Zhixin, deputy commissioner of the National Development and Reform Commission, said in Beijing. There is “serious market disorder” in some regions, Zhu said.
The government may restrict overseas investment in real estate to help cool prices, analysts including China Everbright’s Zhao said. Overseas investors bought at least US$500 million of completed income-producing property in China in the first quarter, compared with US$1.2 billion in all of 2005, according to property agency CB Richard Ellis Group Inc.
Source: Xinhua
