The State Council's recent notice detailing ways to maintain sustainable growth in the real estate market indicated the government's intention to cushion the industry, business insiders said.
Released on Sunday, the notice said the government should focus on efforts to maintain the property market's healthy growth, and that government departments should improve their services for the real estate market.
The latest notice is a vivid contrast to an earlier notice issued in June by the People's Bank of China, which warned of a bubble that could burst in the sector.
"The notice indicated the government's positive view on the domestic market in spite of overwhelming reports of a possible bubble in the real estate market," said Yin Kunhua, vice chairman of Shanghai Real Estate Economic Society.
The central bank's notice also required commercial banks to raise the down payment for luxury housing purchases and increase the threshold of giving loans to developers. However, the notice received a lukewarm response from the country's commercial banks.
"Housing loan and lendings to the developers are generating revenue for the commercial banks, so they are reluctant to turn down their clients," Yin noted. "Some overseas fund managers and financial institutions are also eying the business.
They are actively seeking opportunities in tapping the property loan market here."
Hong Kong-based Bank of East Asia agreed on Sunday to offer mortgage to home buyers of projects developed by Beijing-based Soho China Co Ltd. The 2.5 percent interest rate offered is lower than the 5.04 percent interest rate offered by domestic banks to home buyers.
Yin, also a government policy adviser, said the central bank's notice may prove to be partly ineffective as it is against market rule.
Qiu Xiaohua, vice director of the National Bureau of Statistics, said recently that buying property for investments accounted for some 30 percent of housing consumption which is considered natural and should not be perceived as over-heated.
The State Council's notice also said that budget home development should be promoted to meet the housing demand of wage earners.
Minister of Construction Wang Guangtao said yesterday that China will strive to offer enough standard commercial houses for the majority of Chinese families to purchase or rent, Xinhua news agency said.
In areas with abundant luxury villas, Wang acknowledged, China will check construction by controlling the supply of land, halting approval, elevating the capital-fund proportion and instituting stricter sales conditions.
Overseas developers believed that the Chinese property market, especially that in Shanghai, will remain healthy in the coming years.
Lim Ming Yan, CEO of CapitaLand China, said the property market is a still pillar for the economy.
CapitaLand China is not concerned about rising land cost in the city as long as it is market-oriented.
"The Shanghai government's scrutiny of land deals will also make land sales contracts more transparent," Lim said.
(Shanghai Daily September 2, 2003)