With its property prices fluctuating wildly, Shanghai has been designated as a testing ground for a more centralized, and hopefully more effective, vertical land administration system.

This is part of a series of moves, taken last week by central government agencies, to help regulate the land and housing market. It follows public outcry at rising housing prices in major cities and shady deals in the real estate market.

The Ministry of Land and Resources last week pledged to rebuild its administrative system according to the central bank model, namely by delocalizing a certain number of regional bureaus (nine in the ministry's case) reporting directly to its central office in Beijing.

At the same time, the Ministry of Construction, another key regulator of the market, openly reprimanded 10 land developers and related firms for trying to defy industry rules.

The central government urged all cities to turn over housing development programmes before the end of the year, well before the deadline set in the middle of next year.

Starting from January 2007, according to a central government decision also adopted last week, inspection teams will be dispatched nationwide to evaluate current policy implementation.

In the case of the Ministry of Land and Resources, the other eight bureaus to be established will be in Beijing, Shenyang, Nanjing, Jinan, Guangzhou, Wuhan, Chengdu and Xi'an. These will form a nationwide regulatory network with Shanghai.

The ministry's Shanghai bureau is commissioned to oversee land issues in Shanghai, along with those in Zhejiang and Fujian provinces, with an emphasis on Ningbo and Xiamen, two coastal cities which have also seen rapid housing price rises.

But setting up all nine regional bureaus will be, according to a ministry official who did not want to be named, "a gradual process." There is no need, he told China Daily, to set up all of them at one time.

For the last couple of years, Beijing has tried a plethora of ways to slow down investment in fixed assets (of which housing is a major item) and to control illegal activities in land-related business deals.

But until recently, land supervision seemed to have many loopholes. In order to attract business investment, many tracts of land involved only small payments or scrapped land-use fees altogether according to the ministry's Vice-Minister Li Yuan.

The regional bureaus, whose directors will all be appointed by and answer directly to the ministry, will supervise the legitimacy of all local government major land-use plans. They will report to Beijing all breaches of land-use regulations, and recommend measures of redress.

Since mid-2006, one policy after another has been rolled out to stabilize the land and housing market. In July, an increase in the down payment rate for commercial housing was seen across the board.

In early November a regulation issued by the ministry, to be effective as of January 1, 2007, doubled the acquisition price of arable land for urban development projects.

The shortage of land is felt most acutely in Shanghai with the economic hub’s per capita amount of land is one twentieth of the national average.

According to the Shanghai municipal government, the city is exploring new ways to strengthen land control and management. It plans to introduce stricter land regulation and make better use of available land.

(China Daily December 4, 2006)