This time a year ago local banks were cutting off funds for property purchases in Shanghai and elsewhere in China. The restrictions were applied across the board and, in a nation where a week is a long time in property, 12 months is an age. Not only have many of those restrictions been quietly forgotten – mortgage lenders have mouths to feed after all – but the government's own housing funds are preparing to boost lending to property purchases.
However, real estate remains firmly on the political radar, if the National People's Congress was anything to go by, even though progress on the major policies considered will be slow or nonexistent.
First in the spotlight were proposals to revoke the pre-sales system, which is used to subsidize developers by marketing projects as soon as ground is broken in some cities. The topic was on the agenda as removing the system lessens the risk of buyers putting down money for properties that never get built. There is also the issue of a lack of relevant regulations in this area.
However, in the end, the fact that an estimated 70% of developers would go to the wall within two years without pre-sales held sway and the Ministry of Construction shelved the idea.
Socialist principles were the stopping point over property rights. The NPC recognized the urgent need to codify property rights for state-owned and private enterprises alike in order to facilitate reform of the former and create a level playing field for the latter. But the draft law was nevertheless withdrawn – the spirit is willing but the flesh is weak.
The only major proposal that found its way through the approval process was for a tax on "idle" property. Aimed at buyers of unutilized multiple properties, the tax would restrain misallocation of resources and create a more efficient market allocation system. All of which seems a bit rich, considering the wider problems that exist elsewhere and that most idle property seems to be under government control. It isn't surprising that, despite receiving approval from the deputies, there is no specific implementation plan.
In addition to the above, Premier Wen Jiabao made the most of his chance to say that the tightening policies implemented a year ago have held back speculation and prices. But he also noted that a number of new policies and regulations are required to tackle the problems that have yet to be resolved. I second that.
In fact the central problem is rather straightforward. While mid- to low-income buyers make up the main body of demand, developers like to build high-end properties which yield higher margins even in some unlikely places. A raft of measures encouraging developers to focus on ordinary properties is needed.
In the final analysis, land supply and credit are the most powerful means by which the government can control real estate – and a successful policy is ultimately dependent on these controls' being utilized effectively. A healthy and steady real estate market is the final goal, even if that sounds about as likely as a harmonious society.
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