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China rolls out fresh measures for property market

(Xinhua)
Updated: 2010-01-11 14:04

The General Office of the State Council, China's cabinet, Sunday issued a notice that required central governmental departments and local governments to strengthen management, stabilize market expectations and facilitate stable and sound development of the real estate market.

"With the recovery of the real estate market, such problems as excessively rising house prices have recently emerged in some cities, which call for great attention," said the notice.

It listed 11 specific measures which should be taken in five aspects -- increasing supply of low-cost houses for low-income families and common residential houses, encouraging reasonable house buying while restraining purchases for speculation and investment, strengthening real estate project loan risk management and market supervision, speeding up construction of housing projects for low-income households, and specifying responsibilities of local governments.

On increasing supply of low-cost houses for low-income families and increasing supply of common residential houses, the notice said efforts should be made to construct more smaller-sized low and medium-pricing apartments while increasing land supply for residential housing projects.

According to the notice, governments at all levels should act to push property developers to quicken project development and sales of finished projects.

The notice also said cities nationwide, especially those with high house prices and excessively rising house prices, should step up efforts to build more affordable or low-rent housing projects for low and medium income families.

To increase land supply for residential housing projects, the notice required city governments nationwide to lay out as soon as possible the residential housing construction plan for 2010-12, which should be specific on each year's construction scale of smaller-sized low and medium-pricing houses, low-rent houses and affordable houses for low and medium income families.

On encouraging reasonable house buying while restraining purchases for speculation and investment, the notice said financial institutions should continue encouraging first-time ordinary home buying while strictly carrying out mortgage loan policies on second-time home purchasing.

It said the down payment requirement for those families applying to buy a second or more houses backed with loans should be no less than 40 percent, and the mortgage rates should be strictly settled on the basis of loan risks.

On strengthening property project loan risk management and market supervision, the notice said financial institutions should not grant loans to any developers failing to meet the minimum amount of capital needed to jumpstart a new commercial property.

It also asked the People's Bank of China and the China Banking Regulatory Commission to enhance supervision on property credit among commercial financial institutions.

Efforts should also be made to strengthen monitoring of capital flow and trans-boundary investment and financing activities so as to prevent credit from entering the real estate sector illegally and stop overseas speculative funds from jeopardizing China's property market, it said.

The notice also asked the Ministry of Housing and Urban-Rural Development and other departments to take more measures to crack down on property developers that hoarded land or houses for more profits, and on real estate brokerage which conducted price deception or spread rumors to jack up house prices.

The taxation authority should thoroughly investigate tax fraud cases by property developers and severely punish those violators, while the State-owned Assets Supervision and Administration Commission should further regulate investment activities by major State-owned enterprises in the property market, according to the notice.

On speeding up construction of residential housing projects for low-income households, the notice said governments at all levels should strive to help solve the housing problem of 15.4 million low-income urban households by the end of 2012.

It urged local governments to make more efforts on the renovation of "shanty towns" and increase low-rent houses and affordable houses to low-income families.

On the fifth and final aspect, the notice said more work needed to be done to improve the working mechanism in which provincial governments should assume general responsibility in stabilizing property market and solving the housing problem for low-income families while city-level governments should take the responsibility of implementing specific measures.

Local governments should annul any rules in the property market that were in conflict with the macro-control policies adopted by the central government, it said.

The lengthy notice came after house prices in 70 large and medium-sized Chinese cities rose 5.7 percent year-on-year in Nov 2009, continuing an escalation which has triggered fresh concerns over property speculation and property bubble in the country.

The Nov rise, which was 1.8 percentage points higher than the jump in Oct, was the ninth straight monthly increase of house prices in the survey of real estate across major Chinese cities.

China's property market received a blow and began to fall in late 2008 after the global financial crisis crippled China's once-essential exports and the economy as a whole.

But a series of favorable measures, a credit boom and speculative investment in 2009 had led to a quick recovery of China's property market and price hikes, which started around Mar 2009.

Statistics from Goldman Sachs showed that over the past six years, housing price hikes had outpaced income rises by 30 percentage points in Shanghai and 80 percentage points in Beijing.

In Beijing, the housing price of per sq m is as much as a resident's seven months' salary on average.

Chinese Premier Wen Jiabao told Xinhua in an interview on Dec 27 that the government would use taxes and mortgage rates to stabilize house prices and take measures to clamp down on house speculation.

Starting Jan 1 this year, the government started to reimpose a sales tax on homes sold within five years of their purchase, after cutting the period to two years in Jan of 2009 to boost the then falling property market.