China's property cost curbs to remain

Updated: 2011-11-10 00:49


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BEIJING - Despite recent signs of homes getting more affordable, China's war against its stubbornly high property prices looks set to be a long one, as the government has repeatedly pledged to continue its market curbs until it comes to a "reasonable" level.

Chinese Premier Wen Jiabao again voiced determination to tame the country's housing costs earlier this week, after nearly two years of trying to cool the property market.

"I want to especially emphasize that there will not be even the slightest faltering in the property market curbs," Wen said in a speech during his trip to Russia over the weekend.

He said the government aims to bring real estate prices down to a reasonable level while promoting healthy, sustainable development for the industry. To do this, the Chinese government has so far employed a number of policies, including limits on the number of homes that people can own, higher down payments, the introduction of a property tax in some cities and the construction of low-income housing projects.

This is the third time within in a month that Wen has spoken of continued efforts to cool the market, and it comes at a time when Chinese developers, desperate to reduce the size of their inventories, have finally begun to cut prices to court buyers.

In late October, during an inspection tour and at a State Council executive meeting, Wen repeatedly stressed that the government will unswervingly continue its property-market tightening measures.

Zhou Xin, president of the Shanghai-based E-house China Research and Development Institute, noted that the government's rhetoric has shifted from "curbing excessive growth in property prices" to "bringing prices down to a reasonable level."

"This is a key adjustment," he said.

China's real-estate industry has just begun a nationwide price cut, led by the nation's top developers such as Vanke and Evergrande. In Shanghai, China Overseas's 30-percent discount on group sales has caused fury and protests among its existing homeowners.

Chen Guoqiang, vice-chairman of the China Real Estate Society, said the government's stance indicates the current tightening on the property market are not likely to change, which will result in continued expectations of lower prices and fundamentally decide the market trend.

"'Reasonable' refers to a price level that can be accepted by the general public, and the price-to-income ratio should not stay high," Chen said.

The property market is showing signs of a turning point, he added.

In September, 59 of a sample pool of 70 major cities saw new home prices increase more slowly from a year earlier, compared with 40 cities in August, the National Bureau of Statistics said in a report on its website recently.

However, market observers and industry insiders noted that the current purchase limits, which have been effective in restraining market demand, will not last long, and there will be better tools to keep the market in a sustainable condition.

Yang Hongxu, an analyst with the Shanghai-based E-house China Research and Development Institute, agreed purchase limits are only temporary measures.

But the government is determined to fight a protracted war over speculative buying in the property market, Yang said. Therefore, it will aim to win its upcoming battles with other means, such as introducing property tax to more cities.

China has also been aiming to start the construction of 10 million affordable housing units this year, of which 9.86 million, or 98 percent of the total, had been commenced by the end of September, according to the Ministry of Housing and Urban-Rural Development.

Yang said he expects the government will continue with efforts to keep transaction volumes down in October, and bring stronger drive to the downward trend.

Jiang Weixin, Minister of Housing and Urban-Rural Development, said last month that the government's home purchase limits were the last resort to curb excessive gains in property prices, and will be phased out after a national database on individual property ownership is established.

The government is seeking better ways to solve the property market problem, according to Li Daokui, an advisor and member of the monetary policy committee of the People's Bank of China.

"Whatever measures the government has taken so far, it is time for it to work out the best way for the Chinese market instead of letting the market stay disordered and bubbling," said Li.