Property conundrum to test government's resolve

BEIJING, March 5 (Xinhua) -- Amid the public's calls for the government to stabilize housing prices, Premier Wen Jiabao said China will "firmly rein in" speculative and investment-driven housing demand.

In his final government report delivered to the first session of the National People's Congress (NPC) on Tuesday, Wen said the government should promptly improve the accountability system for stabilizing housing prices and strengthen mechanisms for maintaining the steady and sound development of the housing market.

"We have kept a firm grip on the real estate market and kept housing prices from rising too quickly," he said while summarizing the government's major achievements under his leadership over the past five years.

Wen did not mention specific measures his government took to macro-manage the housing market, including property tax experiments in Shanghai and Chongqing and the State Council's recent move to levy a 20-percent income tax on the capital gains of resold properties.

As a large share of second-hand home buyers are those who can not afford to purchase more expensive new properties, first-home buyers have started a panic purchasing spree in the second-hand property market.

Statistics from the Beijing-based real estate agency 5i5j show that customers commissioning the agency to purchase re-sold homes almost quadrupled on March 2, the day after the income tax rule was announced.

Hu Jinghui, vice president of 5i5j, said he believes second-hand housing transactions will pick up until local governments map out detailed implementation rules.

Zhang Dawei, director of the market research department of the Beijing-based Centraline Property, described the tax maneuver as a blow to public expectations.

"First-home purchasers are more vulnerable to the additional tax burden than speculators and investors, and the re-sold property supply will drop unless the tax burden can be transferred to purchasers. Either way, it will cost more to purchase property," said Zhang.

Prices of new homes are also expected to jump, as first-home buyers will swarm this market to avoid shouldering the new tax burden, Zhang said.