A State Council executive meeting on May 17 adopted a six-point
package of regulatory measures aimed at dealing with the
overheating real estate sector.
But the content of these regulatory measures was already covered
by the State Council Circular on Stabilizing the Housing Price and
Premier Wen Jiabao's "eight suggestions on regulating the real
estate sector" last year.
Essentially, the new measures have been introduced to ensure the
effective implementation of the policies drawn up last year. For
example, the new policy stresses the continuous optimization of the
housing mix, while it will also strengthen the regulatory roles of
taxation, credits and the land-use policy. In addition, it will
help increase the availability of affordable housing for low-income
earners, and improve the supervision of the housing market and the
transparency of the real estate sector.
But the new measures are more specific in terms of the real
problems facing the real estate sector. In comparison with the
measures and policies mapped out last year, they are also much more
detailed. For example, in terms of regulatory leverage, the new
policy emphasizes overall and comprehensive means. This contrasts
with the narrower approach prompted by last year's regulatory
measures, which focused solely on land-use and monetary levers. On
the one hand, the new policy suggests the application of indirect
means such as taxation, credit extension and others to ensure a
balance exists between supply and demand in the real estate market.
Taxation leverage, for example, needs to be used to counter housing
speculation. But on the other hand, the new policy also stresses
the government's direct involvement in the regulation of the
housing market, with the use of administrative measures.
The State Council conference called on various levels of
government, especially city administrations, to include controlling
rocketing house prices and optimizing the mix of housing supply on
their agendas.
In more specific terms, the new policy has the following
features.
First, more varied and comprehensive means are applied.
For example, with regard to optimizing the mix of housing
supply, the six-point policy requires the setting of specific
ratios between higher-end and low-price economic housing, in
addition to requiring an overall improvement in the mix of housing
supply.
Moreover, it explicitly forbids "land hoarding," a step forward
from last year's rather vague banning of "land speculation." This
indicates that making the best use of land and increasing housing
supply have become the important means to control real estate
prices.
And it's the first time that a package of measures has been
introduced to strengthen supervision at every stage of the property
development process. For example, the newly formulated policy
strictly prohibits randomly altering the content of construction
projects, unsound transactions, hoarding finished housing and
driving up prices.
All this means that some compulsory targets will be set from the
very start of a property development project. These will deal with
issues including land-use planning, and the requisitioning and
transfer of land. This is aimed at preventing random changes being
made to the purpose of land use, getting to the very root cause of
the problem.
In addition, banks' point of departure has shifted from last
year's guarding against monetary risks to this year's clear-cut
keeping down the housing price, as is set out by the new
policy.
Second, differentiation is stressed by the regulatory
measures.
The six-point policy covers the supply, demand and transaction
of housing and emphasizes that the credit-extension policy should
be fine-tuned to suit local conditions. This differentiation
demonstrates that the central government realizes that real estate
sector is at different stages of development in different areas.
This signifies a change from the time when "medicine" was
prescribed to the entire nation whereas only one locality "caught a
cold."
Meanwhile, a range of credit-extension policies will be adopted
to suit the interests of different types of buyers. For example,
first-time buyers of apartments will receive preferential treatment
with regard to getting bank loans and making down payments. In
contrast, higher taxes will be levied on those who purchase
property solely for investment purposes.
Third, the targets set by the measures are more clearly
defined.
Compared with previous regulatory measures, the new ones are not
only targeted at developers, buyers, the transaction process and
what is being transacted, but also stress the government's role in
management, offering guidance and exercising
supervision.
By holding government officials administratively responsible for
the real estate sector, the new policy separates the government's
responsibilities from the market. In this way, the different roles
of the government and the market are clearly defined, which will
help resolve the old problem of local governments' economic
interests conflicting with central government regulations.
The newly formulated policy tries to get to the bottom of the
problems besetting the real estate sector, such as land supply,
housing security, management of taxation and the regulation of
credit extension.
The new policy also promotes the resolution of problems through
reasonable consumption modes and a number of channels. These
include the sale of second-hand houses, the leasing market and the
use of government housing subsidies for low-income earners.
In addition, low-rent housing enjoys a higher priority than
low-cost apartments. In the past, the situation was the exact
opposite.
We have reason to believe that the six-point regulatory measures
provide an overall policy framework for the healthy development of
the real estate industry in the future. The formulation of the new
policy also clearly shows the central government's attitude
emphasizing the importance of market mechanisms and government
intervention, balancing supply and demand, and the integration of
long-term targets and short-term ones.
But these new measures need to be fleshed out with more detailed
and more specific rules and regulations so that the principles can
be carried out to the letter.
The author is a senior economist from the Economic
Forecasting Department of the State Information Center.
(China Daily May 24, 2006)