49 Chinese cities miss deadline for price targets

08:21, April 02, 2011      

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China will likely face a long and tough battle to curb soaring property prices, especially since most local governments failed to establish strong price control targets by a deadline set for the end of March, analysts said.

On Jan 26, the State Council, China's Cabinet, put into effect limits on the prices of properties and began requiring local authorities to set targets to control new home prices this year. Those policies and others were meant to cool down the country's overheated property market.

The Ministry of Housing and Urban-Rural Development said on Friday that 608 cities, or 92.5 percent of the 657 cities required to release the targets, had announced their property price control measures by Thursday, according to a Xinhua report.

Meanwhile, skepticism exists about the actual intentions of cities that did manage to meet the deadline. Analysts say they doubt the "sincerity" of most of the targets, which they believe will have little power to rein in property prices.

Shanghai's government, for instance, said on Monday evening that it plans to keep the rate of price increases for newly built homes this year below the growth rate of both the city's gross domestic product (GDP) and of the per capita annual income of urban and rural households.

In January, the city predicted that its GDP will increase by 8 percent in 2011 and the per capita annual income of its urban and rural households will rise at a similar pace.

Many other cities said they plan to limit the rise of new home prices to around 10 percent in 2011, while others have set targets allowing for rises of 15 percent or more.

Li Chang'an, a public policy professor at the Beijing-based University of International Business and Economics, told China Daily on Friday that it was unreasonable to link limits on increases in home prices with rises in local GDP and disposable incomes.

"For instance, a 10 percent price increase for a house valued at 1 million yuan ($152,760) means that a buyer has to pay 100,000 yuan more," he said. "But a 10 percent increase in disposable income only results in an increase of a few hundred yuan for most people."

Wang Lin, a Shanghai resident, told China Daily that she had almost lost hope that she could purchase a new house before getting married at the end of this year.

"The city's target has nothing to do with controlling prices, but is instead a plan stating how much home prices should rise," she said.

Even so, Beijing is adamant that the prices of new homes, mainly of apartments containing fewer than 90 square meters, should remain stable or decline this year, according to a statement posted to the city government's website on Tuesday.

Pan Shiyi, a Chinese real estate tycoon, said in his blog on Wednesday that Beijing was the first city that had called for a price decline in its target, which was "utterly unexpected".

"But without a concrete percentage set for a price decline, it's hard to predict how the target will cool down the current high home prices," Li said.

On Tuesday, the Ministry of Housing and Urban-Rural Development urged local authorities to take public concerns into consideration when setting price targets. "The target should be set at more reasonable and acceptable levels," according to the ministry.

"Local governments are under great pressure to spend tremendous amounts of money this year - to build, for instance, more government-subsidized housing," Li said.

"So most local authorities are not enthusiastic about controlling home prices, because they prefer to increase government revenues by selling land at higher prices."

Home prices increased in 50 out of the 70 large Chinese cities in February, according to the latest data from the National Bureau of Statistics.

Source:China Daily
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