Shanghai Securities News reported, citing official figures, that foreign investment in Shanghai’s real estate sector fell by more than 30% in the first quarter compared year on year. The previous story is that the government, perhaps as a result, has now relaxed some of the buying restrictions.
Zhang Qi, is deputy director of the Institute of Economic and Resource Management, Beijing Normal University, and he believes that the sector needs even more reform measures.
He points out that in the year’s first quarter real estate investment increased 26.9% year-on-year, while housing prices continuously rose, although by smaller margins.
He lists five factors:
1. Rapid economic growth creating a favorable climate for increased real estate investment.
2. Large amounts of capital entered the real estate market because of the favorable macroeconomic climate and positive economic results enjoyed by enterprises.
3. The wait-and-see attitude of the local governments which poses a stumbling block to the implementation of the central government’s macroeconomic readjustment policy.C
4. Construction of low-price housing is well behind demand so low-rent apartments are short of supply.
5. Speculation in the real estate sector goes largely unchecked.
In view of all this he believes the government should work out a package of policies to hold investment-purposed and speculation-oriented housing consumption under check, involving mortgages, taxes levied on real estate and use of land resources, and the taxes imposed on possession of land property and its transfer. In addition, strict differentiations should be made between the need to buy houses for living and that for investment purposes, or for sheer speculation.
Sources: AFP and China Daily.