China moves to cool real estate sector, curb prices

08:26, December 10, 2009      

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The Chinese government intensified its efforts to cool the country's overheated real estate industry Wednesday.

A policy was allowed to expire that had eliminated the turnover tax for those who sold homes they had owned for more than two years. From now on, the tax will instead be waived only for those selling homes they have owned at least five years.

The new guidelines were released following an executive meeting of the State Council chaired by Chinese Premier Wen Jiabao Wednesday.

The original policy – the one that benefited those who had owned their homes at least two years – was enacted by the Ministry of Finance and the State Administration of Taxation to boost the real estate market, which had been hurt by the global financial crisis.

"Suppressing second-hand home sales is an effective way to prevent speculation in the real estate industry," Zhang Huaxue, assistant manager of the China Index Academy, a real estate research institute, said Wednesday, adding that home prices had soared unreasonably since the second quar-ter this year.

China will increase the supply of low cost housing in the future and curb the speculation in the real estate market, Zhang Ping, director of the National Development and Reform Commission, said Wednesday.

"Judging from all the clues above we can see that the government may try its best to suppress the overheated real estate industry next year," Zhang, of the China Index Academy, said.

Ensuring residents with lower income have housing is another possible way to cool the real estate industry.

On December 3, Wen said in Shanghai that China would enact fiscal, financial and land policies to support the construction of low-income housing.

"Ensuring every resident has a house to live in by the end of 2015 is our goal, and increasing the supply of low-rent houses is a possible way," said Chen Huai, director of the policy research center of the Ministry of Housing and Urban-Rural Development, at the China International Real Estate & Archi-tech Fairs over the past weekend.

Home prices in China are out of reach for 85 percent of families, according to an economic blue paper released by the Chinese Academy of Social Sciences (CASS) in Beijing Monday.

The poor enforcement of some policies, including land supply restriction policies and punishment of developers who hold land without developing it, caused soaring home prices this year and the government could adopt a succession of macro-control policies so as to suppress the home prices, the report suggested.

But increasing the supply of low-cost homes will not be easy.

Developers prefer not to develop houses with a lower price, and how to execute relevant policies remains a question, said Yin Bocheng, director of the real estate research center of Fudan University.

"Take the 70/90 policy for example: It has never been fully executed since it was released," Yin said, referring to the 1996 policy which mandates that 70 percent of the new housing developers build must be smaller than 90 square meters.

Also, land for small- and medium-sized housing, and low-cost housing, was only 14.9 percent of the total land available for residential use in the first three-quarters of the year, the Ministry of Land and Resources said Tuesday.

Yi Xianrong, a CASS researcher, said the most effective way to suppress soaring home prices would be to curb the available credit.

Source: Global Times
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