By next June, China should know a bit more about who owns what property, how much of it, as well as how much it’s worth.
Because right now, officials on the central level hardly have a clue.
The system that China uses to register real estate ownership is highly fragmented. In some cities, Chinese record a property transaction in a digitized system. In small counties, they might jot the information down on paper before it’s permanently filed away. Drawing connections between localities – essentially figuring out who owns what nationwide – is almost impossible.
Officials need to connect the dots. The looseness of the system has allowed wealthy Chinese, sometimes government or party cadres, to buy up large quantities of property undetected in different places around the country, a trend that has, among other things, driven housing prices sky high. By figuring out who owns what, the government can stop people from exceeding the limit on property purchases, which differ between cities.
The Ministry of Land and Resources said late last month that it will streamline a national real estate registration system by this time next year. A comprehensive system has been in the works for several years and calls from China’s top leadership during the National People’s Congress in March expedited the process.
In theory, a unified system will let bureaucrats see what real estate an individual citizen owns across the country, whether their properties be in the distant Qinghai province or in Shanghai. It could also be a stepping stone to implementing a national housing tax.
Instituting such a system will be far more difficult in practice. The problems with the current system goes beyond the digital divide, and a full revamp of the way records are kept will require cooperation between ministries, as well as consolidation on laws, a tall order in China.
There are several different laws that specify how to register land. For anyone who owns a patch of forestland, they will have to look to Forest Law for direction. In the countryside, they might need to check Rural Land Contract Law.
Finding the correct place to register can also be difficult as more than 10 different government departments have registration offices. Urban housing, urban land for construction and several other classifications of property all need to be registered in different offices. Some 40 cities have online information systems, but the county level and below has hardly any online record-keeping.
“It’s going to be a big job and not something that can be implemented in the short term,” said James Macdonald, head of research at property management firm Savills China. That’s why it’s unlikely a national system will be rolled out in its entirety by next June. It will probably be put in place in some cities, then those cities will be connected and the system will grow, he said.
The piecemeal nature of the rollout will not have a strong impact on the market, Macdonald said. If a comprehensive system was to suddenly go online, that could shock the housing market. It’s thought that much of the country’s demand is from investors or speculators, not first-time home buyers.
As much as the government would like to preserve the market for newlyweds or those looking to move from the countryside to the city, it also doesn’t want a sharp drop in sales, which would have a devastating effect on a number of sectors that are tied to construction.
In the long run, controlling the market is the main objective of the registration system, but it will also help combat corruption.
A report released Monday by Study Times, a weekly newspaper published by the Communist Party School, said national registration would stop corrupt officials from hiding excessive land purchases and even curb money laundering that is done through the real estate industry.
Several reports in the last year have shed light on assets of party officials, with some having amassed shocking real estate hordes. One case in January drew online public outrage when it was revealed that the head of a rural bank in Shaanxi province owned 41 properties in Beijing worth about US$161 million. The incident demonstrated average Chinese people’s dissatisfaction with how powerful officials have horded property on the public dime, all the while driving up housing prices.
However, it’s unclear if national registration would really have helped prevent the case. The banker, Gong Ai’ai, had used several aliases to keep under the radar, something the system isn’t designed to catch.
Aside from busting corrupt officials, the system could help the government roll out a long-awaited – although seriously contested – housing tax.
At present, limited housing taxes exist only in Shanghai and Chongqing. For more than a year, the government has hinted that it will widen the breadth of the tax, but those efforts have run into strong opposition, likely from officials who own large amounts of property. Little progress has been made.
Drawing connections between property ownership across the country will be essential to pushing through the tax, according to party mouthpiece People’s Daily. Taxes would be based on the accumulated value of properties owned. There are few other ways to derive these values other than recording them together.
In pursuing a nationwide registration system, as well as a housing tax, Beijing is taking steps in the right direction. The short-term cooling measures that China has enacted since 2009 have had little effect in curbing prices. They are also erratic and further convolute what real demand for housing looks like.
As daunting as the task may be, China’s new leaders should continue pushing for greater access to information on the market. It’s a step the country will have to take, better sooner than later.
The housing market is yet another sector that grew up before China could bridle it. Only during the past few years have officials looked back and quivered at the challenge of meaningfully regulating it.
A thorough registration system is part of the foundation on which China can build a healthy real estate sector. Or at least it would be a support beam that the government could raise to brace an increasingly unstable industry.
You must log in to post a comment.
Yes, I would like to receive emails from China Economic Review. (You can unsubscribe anytime)
Copyright © 2018 SinoMedia Group Limited All rights reserved