Economy

Price level stability No 1 goal

By Yu Ran (China Daily)
Updated: 2011-04-11 09:26

SHANGHAI - Chinese Premier Wen Jiabao urged the continuation of efforts to maintain the stability of prices and prevent excessive hikes and drastic economic fluctuations while he was on an inspection tour in East China's Zhejiang province on Friday and Saturday.

"Keeping overall price levels stable has been the top priority of the current macro regulations," said Wen.

With more Chinese cities taking a hard line in controlling rising house prices by rolling out a series of policies, demand has been dampened recently along with the cost of housing.

According to figures released by SouFun, the operator of China's biggest property website, nearly 80 percent of the 33 cities that issued policies to restrict property price rises have seen a dramatic decline in the number of residential properties sold.

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To ease soaring home prices, the central government announced a series of measures starting at the beginning of last year that included tougher requirements for down payments and higher mortgage rates, as well as suspending loans to buyers of third homes.

But Wen noted that local governments should shoulder the responsibility of tightening regulations pertaining to the property market because the issues of housing supply and housing prices could affect social stability and healthy economic development.

Restrictions on home purchases that were announced in Shanghai and several other cities in China aimed at deflating bubbles in the real estate market in February have significantly affected the real estate market since a trial property tax went into effect in Chongqing and Shanghai on Jan 28.

The rules, which were revealed by Shanghai's Housing Guarantee and Administration Bureau, prohibit new home purchases among locally-registered families that already own two or more homes and among non-local registered families with at least one home.

In addition, non-Shanghai-registered families who have no documents certifying they have paid social insurance or income tax in the city for one year are not allowed to buy property.

Beijing municipal government unveiled even tougher measures prohibiting home purchases among non-local registered families that do not have proof they paid social insurance or income tax in the city for five straight years.

On the same day, authorities in Nanjing and Harbin rolled out similar restrictions.

"Because I had heard that there would be restrictions brought in to limit the number of properties owned by one family, I bought an apartment more than a year before my marriage," said Zhou Rui, a man from Shanghai who bought a home in January ahead of policies that limit house purchases.

Zhou added that he has no plans to buy additional homes in the future, even if the policies limiting second and third home ownership are lifted because there will likely be more restrictions in the future if house prices shoot up again.

Families wanting a larger apartment now need to sell the one they are living in before they can buy a new one.

"I feel so regretful that we bought a small apartment when we got married four years ago because we now have to sell the one we are living in before we can own a bigger home," said Chen Li, a pregnant woman who wants a three-bedroom apartment.

Soaring prices and inflation have become a major concern for urban Chinese residents because the cost of living has also been rising.

Last Thursday, China increased gasoline and diesel prices for the second time this year with the ceiling for gasoline prices rising by 500 yuan ($76) per ton and diesel by 400 yuan per ton.

China's central bank raised interest rates by 25 basis points last Wednesday - the fourth hike in six months - in an attempt to bring stubbornly high inflation under control.

"The hikes made my life a bit harder because I now have to pay an extra 300 yuan every month for the mortgage on my apartment compared to what I paid six months ago," said a 25-year-old white-collar worker in Shanghai.

Xinhua contributed to this story.