Friday, February 21, 2014, 08:41
New rules fail to quench home fever
By WANG YING in Shanghai

Just one year ago, the State Council announced new regulatory plans to stabilize property prices in major cities and rein in housing speculation but without success, indicating insufficient supply and robust inelastic demand are still pivotal forces in the market, according to analysts.

The new housing regulations announced a year ago contained five points: improving the accountability system for local officials in implementing home price stabilization work, firmly reining in speculative activity in home purchases, increasing common commercial properties and land supply, accelerating planning and construction of affordable housing projects and, finally, beefing up market supervision and regulation.

Although local officials were told to work out and announce their plans to control new-home prices, and warned that their performance in implementing the task will be evaluated, property prices in most major cities defied these efforts and continued to spiral up.

According to the so-called New Five-point Regulations, the State Council, asked all provincial capitals except Lhasa in the Tibet autonomous region to set a target to control local home prices.

However, in a statistical pool of 70 major Chinese cities, on a yearly basis, all cities apart from Wenzhou reported gains in new-home prices in December 2013, according to the National Bureau of Statistics.

First-tier cities continued to lead the rise in December, with the prices of new homes in Beijing and Shanghai surging more than 20 percent from a year ago.

That means local governments’ plans to either keep property prices stable or make sure the surge in new home prices won’t exceed that of local disposable income have failed.

According to Gu Yunchang, vice-president of the China Real Estate Research Association, the key to reversing excessive home price rises in the past decade was to increase supplies of land and affordable homes.

“We should let market forces play a more decisive role, with the government focusing on offering more subsidized housing in helping the poor,” said Gu.

Gu said only by adding supply could the housing market reach a healthy balance in supply and demand and further cool home price fever.

But senior NBS official Liu Jianwei said that the regulations are starting to hit and the rising trend in local property markets has lost momentum.

“More cities saw price growth ease in December, because a raft of government efforts to stabilize market expectation started to take effect, which included more control measures and increased supplies of affordable housing,” said Liu.

Following earlier tightening moves by first-tier cities such as Beijing, Shanghai, Guangzhou and Shenzhen, quite a few second-tier cities also announced curbs as soaring housing markets put their 2013 price-rise targets even further beyond reach at the end of last year.

Monthly price gains in Beijing, Shanghai, Guangzhou and Shenzhen retreated by 0.1 percentage point, 0.1 percentage point, 0.1 percentage point and 0.4 percentage point, respectively, from those seen a month earlier.

Chen Sheng, vice-president of the China Real Estate Data Academy, agrees with the trend, saying this fundamental change, although still yet to see a real effect, will gradually show results this year.

As the home market is going in different directions, the central government is happy to see more and more local governments using tailor-made local policies to deal with their own issues.

“This is much better than the former central government’s unified policies, which may not quite fit into the local situation,” said Chen.

Chen said apart from the four first-tier cities that saw an average home price surge of more than 20 percent in 2013, quite a few third-tier and fourth-tier cities saw their home prices declining, including Wenzhou in Zhejiang province, Erdos, in the Inner Mongolia autonomous region, and Yingkou in Liaoning province.