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China city douses housing bailout speculation

(Xinhua)

10:28, February 12, 2012

BEIJING, Feb. 11 (Xinhua) -- An east China city that has sparked attention with its housing subsidies has said the policies are aimed at dousing speculation of a potential loosening of property market controls.

The government of Wuhu, a city in eastern Anhui province with 1.5 million residents, announced Thursday that it will grant subsidies and deed tax exemptions to first-home purchasers in 2012.

The measures, which made Wuhu the first Chinese city to boost home sales since 2010, triggered speculation that authorities may lift curbs on the real estate sector, as the market has cooled since the introduction of tightening measures last year.

However, the Wuhu city government rebuffed bailout speculation on Friday, saying the policies are intended to meet consumers' rigid demands for home purchases and attract talented people to work in Wuhu.

"The essence of these measures is to curb the property market, clamp down on speculation and satisfy the home-buying demands of those with low incomes and new residents, as well as give a boost to affordable housing projects," Hong Jianping, the city's deputy major, said at a press conference.

Under Wuhu's new policies, the local government will offer subsidies ranging from 50 to 150 yuan (7.9 to 23.8 U.S. dollars) per square meter for purchases of first homes no larger than 90 square meters.

Home buyers with more extensive educational backgrounds or professional certificates are entitled higher subsidies, a policy that the government has cited as a method to attract more talented workers.

But analysts have argued that Wuhu's subsiding polices are intended to bail out the sagging property market, warning that more local governments may follow suit.

Housing prices in Wuhu dipped for the eighth straight month in January, with the average price standing at 5,567 yuan per square meter, down 5.68 percent from a year earlier, according to data from the China Index Academy (CIA), a leading property research institute.

"Wuhu is the first city in China to waive deed taxes and grant housing subsidies. It is really hard to convince people that they're not just trying to rescue the market," Zhang Dawei, chief analyst at Centaline Property, was quoted as saying by the 21st Century Business Herald.

Since 2010, China has introduced a series of tightening measures to cool down the runaway property market, including bank lending restrictions, a ban on third-home purchases and trial property taxes in the cities of Chongqing and Shanghai.

The policies will be maintained in 2012 to bring housing prices to a reasonable level, authorities said following China's central economic work conference last December.

Housing inventories in major cities such as Beijing and Shanghai have piled up to a record high, according to 5i5j Real Estate Service Co., one of the country's largest real estate agents.

Average property prices in China declined for the fifth consecutive month in January, a sign that efforts to crack down on speculation are working, the CIA said.

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