Backgrounder: Squeeze tightens on China's soaring home prices

15:30, February 27, 2011      

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Chinese Premier Wen Jiabao said Sunday he was determined to tame the country's runaway housing prices and keep them at a reasonable level during his tenure, which is to end in March 2013.

Wen made the pledge in response to complaints about soaring home prices in an online chat with the public, jointly hosted by the websites of the central government (www.gov.cn) and Xinhua News Agency (www.news.cn).

Year-on-year growth rates of property prices in 2010 were: January 9.5 percent, February 10.7 percent, March 11.7 percent, April 12.8 percent, May 12.4 percent, June 11.4 percent, July 10.3 percent, August 9.3 percent, September 9.1 percent, October 8.6 percent, November 7.7 percent, December 6.4 percent.

The government has announced a series of policies to discourage property speculation and curb excessive gains from home prices, which include:

Last year:

Jan. 10: The State Council says it will maintain the minimum down payment for purchases of second homes at 40 percent. It asks the central bank and banking regulator to step up oversight of mortgage lending.

Jan. 21: The Ministry of Land and Resources requires a minimum 70-percent of new land supply be used for affordable housing and smaller apartments, and prohibits land grants for villa construction.

March 10: The Ministry of Land and Resources requires property developers to pay a 50-percent down payment on land acquisitions within a month of signing the contract. They must also pay a deposit, equal to 20 percent of the minimum price for the land, when participating in auctions.

March 12: The Ministry of Land and Resources launches an investigation into land hoarding from March to July.

March 18: The State-owned Assets Supervision and Administration Commission gives 78 state companies whose core businesses are not property 15 working days to submit plans to divest from the sector.

April 15: The Ministry of Land and Resources says 180,000 hectares of land will be allocated to new housing nationwide, excluding Tibet Autonomous Region, in 2010 compared with 76,461 hectares in 2009.

April 15: The State Council announces a rise in down payments for second-home buyers to a minimum 50-percent from 40 percent. First-home buyers must pay 30 percent if the property exceeds 90 square meters.

April 20: The Ministry of Housing and Urban-Rural Development bans developers from receiving down payments on unfinished properties unless they have government approval for pre-sales.

Sept. 27: The Ministry of Land and Resources bans developers and their controlling shareholders from bidding in land auctions if they have failed to start developing land a year after acquiring it at auction.

Sept. 29: Central government ministries issue new rules for all first-home buyers to pay a down payment of at least 30 percent of the purchase price. Banks are ordered to stop lending for third-home purchases.

Oct. 20: The People's Bank of China raises its benchmark one-year lending and deposit rates by 0.25 percentage points. The one-year deposit rate rises from 2.25 percent to 2.5 percent, and the one-year lending rate is up from 5.31 percent to 5.56 percent.

Nov. 3: The Ministry of Housing and Urban-Rural Development blocks Public Housing Fund mortgages for third-home buyers.

Nov. 15: The Ministry of Housing and Urban-Rural Development says foreigners will only be eligible to purchase one apartment for their own use, and they are required to provide proof of having worked in the country for at least one year prior to the purchase.

Dec. 7: The China Banking Regulatory Commission orders lenders to tighten controls on their loans to the property sector.

Dec. 22: The Ministry of Commerce intensifies scrutiny of foreign investment in the country's real estate market.

Dec. 25: China raises mortgage rates for people borrowing from housing provident funds by 25 basis points, beginning Dec. 26.

This year:

Jan. 14: The People's Bank of China announces a rise in the bank reserve requirement ratio by 50 basis points, effective from Jan. 20.

Jan. 25: China's ministries issue new regulations for real estate brokerages effective from April 1, which provide detailed guidance regarding the operations of real estate agents, realtor standards, and a list of prohibitions when conducting business.

Jan. 26: The State Council announces a rise in the minimum down payment requirement for the purchase of a second home to 60 percent of the property's value, previously set at 50 percent.

It also orders cities where home prices are skyrocketing to implement strict measures to restrict home purchases.

Jan. 27: The State Council, China's Cabinet, approves the trial of a property tax in some cities. Shanghai and Chongqing will trial the tax first, from Feb. 28. The cities will decide the details of the levy.

Feb. 8: The People's Bank of China announces a rise in the one-year deposit and lending rates by 25 basis points, effective from Feb. 9.

Feb. 9: China raises mortgage rates for people borrowing from housing provident funds by up to 25 basis points.

Feb. 18: The People's Bank of China announces a rise in the bank requirement ratio by 50 basis points, effective from Feb. 24.

Source:Xinhua
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