Beijing city vows to lower home prices in 2011

14:53, April 01, 2011      

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By the deadline of March 31 which China's Central Government sets for the major cities to reveal to the public a ceiling of their housing selling prices, only the capital city of Beijing made a bold vow to basically stabilize, and if possible, trim this year's price, from last year's level.

The State Council, headed by Premier Wen Jiabao, wanted a public promise made by China's city mayors to regulate property prices, as a strict administrative measure to rein in elevated real estate bubble and runaway prices, which, experts believe, could cause a meltdown of the property sector and enormous risk to China's bank system.

On March 28, Shanghai, the most prosperous mega-city in China, announced that it will try to moderate its property price rise, making the annual rise no more than the city's yearly GDP growth rate, which is put at 8 percent. The next day, Guangzhou and Shenzhen, another two mega-cities in South China, said that they will try to rein in their 2011 housing price rise within 11 percent and 10 percent, respectively.

The planned rates immediately drew the ire and satire of thousands of online readers, who said they were annoyed and angered by the city authorities. Most complained that the cities, including shanghai, Guangzhou and Shenzhen, dared to brush aside the central government's order, pinning hope on skyrocketing housing and land-sale prices to enrich local coffers.

Beijing City, nevertheless, put on a policy statement on its official website late Tuesday night, vowing to stabilize and even lower home prices in 2011. The city's audacity and ambition to strongly regulate property prices have been warmly welcomed.

Clear signal on home price control

"The capital city's no-nonsense statement sends a clear signal that home prices will continue to be strictly controlled, after a year of high-profile government regulation in 2010, "said Zhu Zhongyi, deputy commissioner of Beijing's Real Estate Association. "Beijing has the resolve to put the home price tiger in a cage."

The online statement said Beijing will enhance supplies of indemnity homes, including low-rent housing and public rental housing, which are to be subsidized by the municipal finance. All together, 60,000 units of subsidized homes will be built this year.

Also, Beijing plans this year to earmark 1,330 hectares, out of a total 2,550 hectares of land, for home development, accounting for 52 percent, city officials said.

Pan Shiyi, a property tycoon, said that he was "utterly unexpected" to see the audacious plan of Beijing. He and other insiders admitted that the capital city has taken in heart the "political will" of the Premier Wen's central government, while other cities were playing "cat-and-mouse".

In China, proceeds from land sale have become the single largest revenue source of all local governments. That's why Chinese cities have been unenthusiastic in regulating land and home prices in their jurisdictions.

Zhu Zhongyi said that Beijing authorities have heeded rising grievances from the public, and increasing concerns of the central government, which fears the frenzy in investors' hoarding and speculating homes will eventually cause the bubble to explode, dealing a fatal blow to China's economy.

Since early 2010, Wen's government has ordered interest rates on bank loans, including home mortgages, raised three times, and down payment for the second home hiked to 50 percent of a mortgage. Last April, it ordered cities to restrict sale of homes. A permanent urban household could only buy two homes, while non-permanent, including expatriates, residents could only buy one home in a city.

As a result of the stringent administrative measure, home prices in China have shown signs of moderation and even decline. Lately, half a dozen luxury property projects in Beijing have, reportedly, reduced selling price by 10-20 percent from last year's highs.

By Li Hong, People's Daily Online
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