Beijing Aims to Stabilize New Home Prices, Joining Other Cities in Curbs
Exorbitant housing prices have long been both a social and political problem in China. The central government has placed regulating the housing market as a top priority. Beijing, following the lead of other Chinese cities, is using introducing new measures to stabilize housing prices. From Bloomberg News:
Beijing said it will stabilize new home prices this year and aims for a drop from 2010, the local government announced on its website late yesterday. Shanghai said on March 28 it will limit gains in new home prices to no more than the pace of economic growth and average income expansion.
About 40 Chinese cities said they will cap new home prices below annual economic and disposable per-capita income growth after local governments were ordered to submit home price control targets by the end of March. The Chinese government is intensifying efforts to keep housing affordable after prices gained for 19 consecutive months to December and climbed in all but 68 cities the government monitors in February.
“The capital city of Beijing’s property curbs always are the most severe among peers,” said Jeffrey Gao, a Shanghai- based property analyst at Royal Bank of Scotland Group Plc. “But even that target was almost like nothing.”
Since last year, the Chinese central government has announced policy changes to curb housing speculation. From Global Property Guide:
Measures approved in January 2011 to cool China’s housing market:
- Higher down payments for second homes (from 50% to 60%)
- More areas where home purchases are limited.
- The government is also testing new property taxes in Shanghai and Chongqing, in southwestern China.
The introduction of cooling measures began in April 2010, when the government raised real estate transaction taxes, increased minimum down payments, and hiked mortgage interest rate margins.
However, the article continues, constraining housing speculation may be easier said than done.
Analysts nevertheless question the effectiveness of these regulations. With economic prospects in the US and Europe dull, global investments are heading to China. Chinese companies are raking in huge profits from exports. All this money has to go somewhere; a huge chunk is being spent on housing.
Cracking down on speculators is not easy. China’s corruption-ridden bureaucracy is incapable of prosecuting investors with strong links to the Communist Party. New regulations simply make speculators move to other areas, shift to another industry, or increase their bribes to regulators.