The?State Council?Wednesday declared its readiness to
use a combination of tax, credit and land policies to ensure the
healthy development of the real-estate sector which many economists
contend is displaying signs of overheating.
An executive meeting of the State Council chaired by Premier Wen Jiabao pledged to take the necessary
measures to steady the property market and curb price rises in
major cities.
After earlier macro-economic policies brought "the momentum of
high investment growth and house price rises basically under
control" the meeting focused on the remaining problems.
The gathering was of the view that "housing prices are still
rising too fast in some major cities" and warned that "order is yet
to be restored in the property market."
So tax, credit and land supply policies should have a bigger
role to play in guiding the market, according to the meeting.
While it's yet to be seen what tax measures will be introduced,
the People's Bank of China (PBOC) or central bank, raised its
one-year benchmark lending rate by 27 base points to 5.85 percent
in April.
Many economists expect the PBOC to take further measures to cool
the sizzling economy which grew 10.2 percent in the first
quarter.
"A moderately tight monetary policy, as seen from the central
bank's rate hike, serves as a timely dampener on the housing market
and so would any new tax and land supply policies," said Han Meng,
an economist with the Chinese Academy of Social Sciences.
Property prices in 70 large to medium-sized Chinese cities
witnessed an average 5.5 percent increase in the first quarter over
the same period in 2005, according to the National Bureau of
Statistics.
Other measures the State Council has vowed to pursue include a
housing supply structure which favors low-income households and an
improved information disclosure mechanism. The emphasis on housing
development, the meeting pledged, would be on small to medium-sized
affordable homes and rental properties.?
At the end of April, 40 major cities reported 1 million
properties on the market with a floor area of 120 million square
meters. However of those only 12,000 were smaller than 60 square
meters, according to the Ministry of Construction.
The development of the real-estate sector and housing
construction, the State Council circular said, "should take into
full consideration the country's basic conditions, such as its
large population and small land mass on a per capita basis."
Demolition of old urban housing should be properly paced to
reduce the demand for housing, the meeting added, stressing the
importance of a healthy housing sector as "a pillar industry" of
the economy.
"The policies that the government has promised to introduce have
long been debated," said Yi Xianrong, a research fellow at the
Chinese Academy of Social Sciences and a long-time critic of land
developers. "This is a strong signal that Beijing will not let the
housing market go astray."
(China Daily May 18, 2006)