Long-term mechanism for real estate is coming

By Xia Dan Source:Global Times Published: 2017/10/22 18:28:40

Illustration: Peter C. Espina/GT

The 19th National Congress of the Communist Party of China (CPC) convened on Wednesday. In his speech delivered at the opening session of the Party Congress, General Secretary of the CPC Central Committee Xi Jinping stated that housing is for living in, not for speculation, and the country will move faster to put in place a housing system that ensures supply through multiple sources, provides housing support through multiple channels and encourages both housing purchases and renting.

"This will make us better placed to meet the housing needs of all of our people," Xi said. The statement was greeted by applause from delegates. Compared with five years ago, the focus of the country's efforts to build a housing system has changed.

It must be emphasized that housing is for people to live in, not for speculation. Over recent years, the country's housing market has gone past the threshold of one household owning a residence on average, although there are differences in various regions. In some parts of the country, there's increasing speculation in the housing market where home prices are seen rising too fast. This indicates a new issue with the market: the coexistence of an overall balance and a partial imbalance. Along with the changing landscape in the property sector, the 19th CPC National Congress lays the focus on ensuring that housing is for living in, not for speculation. The words first appeared in a statement released following the Central Economic Work Conference at the end of last year as the government moved to put the development of the housing market in the correct position. The Party Congress reiterated the housing policy stance, sending a clear message that policymakers are determined to return housing to its essence - being built to be inhabited - and to battle against speculative investment.

Since last year, the country's housing policy has tightened substantially. During the weeklong National Day holiday last year, a wave of home purchase and credit restrictions swept through some high-profile cities as the country took a tougher line on its housing market. Tighter property controls were introduced in March this year, and spread to a number of smaller cities that have good locations, such as some third- and fourth-tier cities on the periphery of a few core cities. Efforts to rein in the property sector were even announced by county or district level governments, in a suggestion that property controls are becoming more targeted.

And more controls are coming. Since last month, various second-tier cities including Chongqing, Nanchang, Changsha, Xi'an and Guiyang, and a host of third-tier cities such as Guilin and Beihai have rolled out property restriction measures, mostly sales restrictions. The number of cities with sales restrictions in place has so far totaled more than 50. Also in September, the People's Bank of China, the country's central bank, gave its endorsement to a move by banks to raise interest rates on housing loans for first-home buyers in Beijing. Meanwhile, many cities began a crackdown on short-term consumer loans being spun into the property market. Some observers had wondered whether the country's housing policy might take a turn toward loosening, but instead policy continuity and stability has been maintained.

Certainly, the signal sent by the top leadership that the country's housing policy will continue along its tightening path is aimed at fighting against speculative buying, rather than freezing the market. The four key aspects of the controls - home purchase restrictions, lending controls, home price caps, and sales restrictions - will ensure the housing market stays steady. The follow-up efforts, it is believed, will focus on rectifying the situation in some regions with fast-rising home prices and clamping down on various unregulated activities.

The country is on track to build a long-term housing system that encourages both home purchases and renting. A report delivered at the opening ceremony of the 18th CPC National Congress stated that a housing system should be put in place that combines market supply and government support, and strengthens construction and management of low-income housing. The 19th CPC National Congress makes up for the missing piece of the housing supply system, elevating home rental to the same status as home sales and setting the creation of a home rental market as a key direction for the establishment of a long-term housing system.

In June 2016, the State Council announced guidelines for fostering home rental market development. The Ministry of Housing and Urban-Rural Development (MOHURD) also unveiled draft regulations for governing home rental and sales in May. In addition, nine government bodies including MOHURD in July released a policy that aims to ramp up the development of a home rental market in bigger cities with net population inflows, with an initial 12 cities selected for the launch of a pilot program.

Take Shanghai as an example. According to the city's housing development plan, a total of 1.7 million housing units will be newly added to the local market through 2020, with about 700,000 units built as rental homes, and 550,000 as affordable homes. Rental homes apparently have the lion's share.

In the foreseeable future, it is believed that a flurry of incentive policies that could include fiscal subsidies, tax relief and land specifically allocated for rental housing will be announced at the local government level to boost the home rental market. And eventually, large-scale professional home rental companies will emerge and will enable the rapid creation of a housing system that attaches equal importance to home purchases and rental.

The author is a senior analyst with Bank of Communications in Shanghai. bizopinion@globaltimes.com.cn

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