China to firmly curb excessive rise of housing prices

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The Chinese government will firmly curb the excessively rapid rise of housing prices in some cities this year, Premier Wen Jiabao said Saturday, voicing the determination to cool the red-hot property market.

The government aims to "genuinely stabilize housing prices and meet the reasonable demands of residents for housing", Wen said when delivering a government report to open annual session of the National People's Congress (NPC), the top legislature.

"We will further implement and improve policies for regulating the real estate market and firmly curb the excessively rapid rise of housing prices in some cities," Wen said.

He said the government will formulate and announce an annual housing development plan, designate sites for building low-income housing when planning for new construction projects, and make sure that all designated sites are used to develop low-income housing.

Total number of units of new low-income housing and units in run-down areas that will undergo renovation will reach 10 million, and 1.5 million dilapidated rural houses will be renovated, Wen said.

Emphasis will be placed on building more ordinary small and medium-sized commodity housing units.

The government will also give priority to developing public rental housing, with allocation of 103 billion yuan (15.6 billion U.S. dollars) in this year's budget for subsidies to support the work, an increase of 26.5 billion yuan over last year.

The premier said governments at all levels will be asked to raise funds through various channels and substantially increase spending in these areas.

According to a draft plan for next five years' development, which was released Saturday to national lawmakers for reviewing, China aims to build 36 million low-income housing during the 2011-2015 period, raising the proportion of affordable homes to 20 percent of China's total supply by 2015.

The share was around 8 percent last year, according to the Real Estate Research Institute of Tsinghua University.

Wen said the government will strictly implement differentiated housing credit and tax policies and tighten tax collection, and effectively curb speculative and investment purchases of housing.

He also requested local governments to shoulder direct responsibility for stabilizing housing prices and guaranteeing the availability of low-income housing.

Officials will be held accountable if they put insufficient effort into stabilizing housing prices and promoting the construction of low-income housing and thereby affect social development and stability, he said.

The pledge came after a raft of measures the central government put in place since 2010 to stabilize the runaway market. China's housing prices have been climbing steeply since June 2009, fueled by record bank lending and tax breaks. The monthly year-on-year growth rate hit a record 12.8 percent in April last year.

The soaring prices have spurred rising complaints from ordinary Chinese as well as fears of a property bubble, which prompted the government to tighten grips on the market.

So far, the government measures, mainly targeting at curbing speculation which is to blame as one of the major reasons for pushing up prices, include higher down payments and mortgage rates and purchase limits.

In a tougher move, China kicked off the long-awaited trial property tax in Shanghai and Chongqing in January this year. The pilot taxation is expected to expand nationwide, according to a report from the National Development and Reform Commission.

Jia Kang, senior official with the Ministry of Finance, said although the property tax could hardly reverse the rising trend of housing prices amid rapid urbanization in China, it is able to frustrate speculation and squeeze bubbles.

Moreover, more than 20 cities had imposed caps on the number of apartments a family can buy as of the end of February, another step to discourage speculative and investment purchases.

However, the market seems to defy the so-called "the toughest" action in history and sees no clear sign of falling in prices in major cities.

Government data showed last month that prices of new properties in 68 of 70 major cities surveyed grew from a year earlier in January, with 10 cities reporting double-digit increases in new home prices.

"Purchase limits as an administrative intervention is necessary as the soaring home prices have hurt the economic health," said Liao Yingmin, researcher with the Development Research Center of the State Council.

In China, a country with a huge demand of housing amid fast urbanization and limited land, administrative restrictions would affect demand and supply, and eventually prices, Liao explained.

However, analysts see the method as a short-term remedy, and the real cure is to set up a long-term mechanism, including legislation and market reform.

The government will scrap the purchase limits one day, but it helps buy time for the government to establish a long-term mechanism, Liao said.

Dong Pan, property expert with the Beijing Normal University, said long-term mechanism means total overhaul of local government's reliance on land transfer for fiscal revenue and the property taxation system, in addition to increasing affordable housing.

Wen Jiabao said in an online chat on Feb. 27 that the government will use economic,legal and administrative methods, if necessary, to restrict speculation.

He said he is confident that the measures will eventually pay off.

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