Real estate stabilization

By Huang Ge Source:Global Times Published: 2017/8/21 17:53:39

Beijing govt introduces joint property ownership policy, other Chinese cities may follow suit

A migrant worker stands between two tall building complexes in Guomao, a downtown area of Beijing's Chaoyang district. Photo: IC

Beijing authorities are mulling over new homes that will be owned jointly by the government and individuals to help first-time home buyers get onto the property ladder. In addition, the government has rolled out strict criteria that requires, for example, buyers not to own an existing home and single buyers to be at least 30 years old. It will be possible for buyers to pay 75 percent of the total apartment price and hold corresponding ownership with authorities, according to experts. The new policy could also encourage other Chinese cities to release further cooling measures and shared-ownership housing could be soon rolled out on a national level.

The Beijing municipal government has launched a first-of-a-kind joint property ownership program in an effort to help first-time buyers, tame surging home prices and further stabilize the real estate market.

The so-called jointly owned homes policy will allow the government to share ownership with purchasers, so that first-time buyers can own homes at a cheaper price, and give "right of use" to the latter, the Beijing Municipal Commission of Housing and Urban Rural Development (BMCHURD) said on August 3. 

The commission announced on August 14 that such buyers can enjoy the local rights of household registration (hukou) settlements and school admissions for children.

But public concerns have immediately piled up over, for example, whose name can be inked on the housing ownership certificate, how will the ownership be shared and who is qualified to buy the homes.

Ownership proportion debates

According to the regulations released by the BMCHURD, buyers and their families must not already own a property under their names, or have owned one in the past. Single purchasers should be at least 30 years old and one family should only apply for one such home.

Householders living or working in a certain district will be given priority for the new apartments in that district over buyers from other districts, said the regulations that have now been released for public consultation purposes.

Shares of these kinds of apartments will be allocated by lottery.

 "Buyers can get an apartment without paying in full, which will significantly lower the burden for first-time purchasers who have rigid demands for a home," Song Ding, a Shenzhen-based market analyst at the China Development Institute, told the Global Times on Thursday.

The proportion of the ownership, which has drawn the most public attention, will be decided on the basis of housing prices in the neighborhood as well as the buyer's pressure of getting a home, experts said. Authorities have not clarified that clause yet.

For example, a 50 percent ownership for each side is possible. In such case, buyers would need to pay just half of the asking price to get a home and could buy back the rest of the shares in the future, Yan Yuejin, a research director at the Shanghai-based E-house China R&D Institute, told the Global Times on Thursday.

Yan forecast that, given the current market situation, it is reasonable for buyers to pay 75 percent of the total home price and get 75 percent of the ownership. The remaining 25 percent of the ownership will then be held by the government.

The average sales price of a new apartment in Beijing was 48,463 yuan (7,263) per square meter in July, up 12 percent from the previous month, according to recent data released by E-house China R&D Institute.

Strengthened support

"The municipal government has absolute control over housing agents' role in the shared-ownership home plan and we are not allowed to help sell or rent these kinds of apartments," said an agent surnamed Ju, who works at a branch of the real estate agency Lianjia in Beijing's Chaoyang district.

Ju told the Global Times on Friday that the newly announced jointly owned home program is like "an improved version" of the old, self-occupied home, which was released in 2013 as a part of the country's low-income housing program.

In 2014, Beijing introduced 23,887 units of self-occupied homes, with that number decreasing by 8,000 units in 2016, China Newsweek reported on August 5.

Self-occupied homes are not provided for profitable sale purposes. They are fully owned by individuals with no government share, but if they are put up for sale at an increased price, the government will receive 30 percent of that increase.

"It is not easy to get a self-occupied apartment as the process could take several years and these types of houses are often located in the suburbs," said Chen Nao, a 31-year-old Beijing resident who submitted an application for a self-occupied home in May.

Chen said that he would apply for the shared-ownership homes, "but we do not know what the shared-ownership home plan will actually be like in five years time," he told the Global Times on Friday.

After five years, owners will be given the option to buy the remaining share of their homes at market price, said the BMCHURD.

The price should be based on market prices for the next five years, Yan forecast, noting that home price increases could also be shared by the government and home owners.

"Given that the suburbs have ample land space [in comparison to the city center] and are able to host large-scale projects, these outskirt areas are therefore likely to be the location for shared-ownership homes," he said, predicting that land supply for the new arrangements would possibly appear in the fourth quarter of this year.

Clarifications needed

The new policy sets a precedent for other cities across the country to follow and a nationwide rollout seems possible, but further guidance is needed, experts advise.

 "We need to wait and know more details on how Beijing authorities plan to implement such a policy before determining its suitability for a nationwide rollout," Steven McCord, head of research at global real estate consultancy JLL North China, told the Global Times on Thursday.

Similar initiatives were previously introduced in six Chinese cities in April 2014, such as Huai'an, East China's Jiangsu Province, Huangshi, Central China's Hubei Province and Shanghai, according to media reports.

Experts are looking forward to the prospect of the new policy, but say that grey areas still remain.

"How to ensure the school enrollment of the buyers' children… and how to split property rights if a couple divorces [are questions yet to be answered]," said Yan, the expert at Shanghai-based E-house China R&D Institute.

The China Newsweek report said that 70 percent of jointly owned home resources will be allocated to highly skilled people, while the remaining 30 percent will be injected into the market.

McCord echoed this by saying that "this policy would continue helping Beijing attract high-level talent as it seeks to strengthen its role as China's elite decision-making hub."

However, Yan argues that it is unlikely that the offers will be given to talents in particular, but that it is likely the government will try to guide some talents to rent a home first, and then buy an apartment.

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