China's asset prices remain bubbling up (2)

09:34, December 16, 2009      

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Tian Yun, vice president of the China Macro Economics Institute, said, "the latest measures will be ineffective."

"The current high prices are pushed by joint efforts by the central government and local governments," he explained.

"State-owned enterprises have become the hands that are pushing the high prices, and local governments depend on high property prices to assure local expenditure," he said.

Developers also prefer not to develop low-price housing, and how the government will execute its relevant policies remains a question, Yang said.

Credit pinch a key

Yi Xianrong, a researcher at the Chinese Academy of Social Sciences, confirmed Tuesday that tightening credit lines would be the most effective way to curb the housing market, because the soaring home prices at present are caused by lax credit policies.
Experts said the State Council's action guidelines announced Monday show its intent to restrict the credit policies for mortgage loans so as to curb speculation.

"From what the guidelines indicate, the buyers who want to buy their second or third houses need to pay a down payment of no less than 40 percent of the total value," Chen Guoqiang said yesterday. "This means that profiting from fast re-sales will be under control."

The central government also announced on December 9 that people must now keep their houses for five years before they can resell them, a change from the previous minimum of two years.

Zhong Wei, director of the Financial Research Center at Beijing Normal University, said the growth of the real estate market is expected to slow down next year, with total sales of 3.3 trillion yuan, compared with this year's 3.6 trillion.

Source: Global Times
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