Property conundrum to test government's resolve
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E-mail Xinhua, March 5, 2013
Amid the public's calls for the government to stabilize housing prices, Premier Wen Jiabao said China will "firmly rein in" speculative and investment-driven housing demand.
In his final government report delivered to the first session of the National People's Congress (NPC) on Tuesday, Wen said the government should promptly improve the accountability system for stabilizing housing prices and strengthen mechanisms for maintaining the steady and sound development of the housing market.
"We have kept a firm grip on the real estate market and kept housing prices from rising too quickly," he said while summarizing the government's major achievements under his leadership over the past five years.
Wen did not mention specific measures his government took to macro-manage the housing market, including property tax experiments in Shanghai and Chongqing and the State Council's recent move to levy a 20-percent income tax on the capital gains of resold properties.
As a large share of second-hand home buyers are those who can not afford to purchase more expensive new properties, first-home buyers have started a panic purchasing spree in the second-hand property market.
Statistics from the Beijing-based real estate agency 5i5j show that customers commissioning the agency to purchase re-sold homes almost quadrupled on March 2, the day after the income tax rule was announced.
Hu Jinghui, vice president of 5i5j, said he believes second-hand housing transactions will pick up until local governments map out detailed implementation rules.
Zhang Dawei, director of the market research department of the Beijing-based Centraline Property, described the tax maneuver as a blow to public expectations.
"First-home purchasers are more vulnerable to the additional tax burden than speculators and investors, and the re-sold property supply will drop unless the tax burden can be transferred to purchasers. Either way, it will cost more to purchase property," said Zhang.
Prices of new homes are also expected to jump, as first-home buyers will swarm this market to avoid shouldering the new tax burden, Zhang said.
CONUNDRUM
NPC deputies and members of the Chinese People's Political and Consultative Conference (CPPCC) National Committee, the country's political advisory body, are looking to the State Council, China's Cabinet, and other government departments to meet housing demand.
The government's conundrum lies in finding a macro-management solution that will keep housing prices from rising too rapidly, while unyielding housing demand from new home buyers and limited investment channels elsewhere in the financial market both drive up housing prices.
Amid the recent exposure of corrupt officials who have illegally accumulated properties as many Chinese tighten their belts to pay their mortgages or struggle to make ends meet in run-down apartments, public sentiment regarding the country's real estate macro-management work is weak.
In one notorious case, Gong Aiai, former deputy head of the Shenmu County Rural Commercial Bank in Yulin City, Shaanxi Province, was detained for having accumulated more than 20 properties worth an estimated 1 billion yuan (159 million U.S. dollars) in Beijing using fake IDs and aliases.
At the ongoing CPPCC session, CPPCC National Committee member Hao Zhensheng, director of the Chinese Academy of Press and Publication, urged the government to improve housing information transparency.
Also at the session, the Jiu San Society, a non-Communist political party with more than 132,000 members, submitted a proposal on toughening housing market regulation.
"If the government fails to stay on top of the changing supply-demand situations and vacancy rates, it will be difficult to accurately squeeze out speculative demand and effectively macro-manage the housing market," reads the proposal.
Formally founded in Chongqing on May 4, 1946, the Jiu San Society largely consists of senior and leading intellectuals in the fields of science and technology.
"Without a nationally-connected and transparent housing information system, curbing housing speculation and broadening the property tax will be empty talk," said Guo Yue, the head of the administration and discussion of state affairs department of the Jiu San Society.
CPPCC National Committee member Jia Kang, director of the Institute for Fiscal Science Research under the Ministry of Finance, dismissed notions that technical barriers having hindered the construction of such an information system.
"The real obstacles come from government departments and local governments that intend to use isolated systems to protect regional interests. China's pending reform measures will break down such obstacles put up by those with vested interests," said Jia.
SATISFACTORY HOUSING FOR THE PEOPLE
On Tuesday morning, Premier Wen said the Chinese government will tighten real estate market regulation and continue to build and manage government-subsidized housing, guaranteeing satisfactory housing for the people.
This year, 4.7 million government-subsidized urban housing units will be basically completed, the construction of another 6.3 million units will begin and the renovation of dilapidated rural homes will continue, he said.
Over the past five years, more than 18 million various types of government-subsidized housing units have been built, and over 12 million housing units in run-down areas have been upgraded, according to the report Wen delivered on Tuesday.
In a separate report issued by the National Development and Reform Commission (NDRC), the country's top economic planner, non-governmental capital will be encouraged to participate in the construction of government-subsidized housing this year.
The NDRC says its macro-management work aims to increase land supplies for housing construction, provide more ordinary small and medium-sized condominiums, continue to implement differentiated housing credits and tax policies and limit home purchases to rein in speculative and investment-driven housing demand.
With a new Cabinet set to be formed at the legislative session that closes on March 17, legislators and political advisors say the country's housing macro-management maneuvers will become more clear.
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