China Cools Real Estate and Builds Low-income Housing


China’s central government has taken a number of measures to curb property bubbles cropping up across its major cities, including limits on purchases, hiking interest rates, and raising bank reserve ratios.  In addition, Chongqing and Shanghai have introduced property taxes with housing authorities in the capital waiting in the wings.  
Beginning last month, these measures have started to pay off as prices saw declines along with a slowdown in growth.  In a recent survey by the National Bureau of Statistics (NBS), 8 out of 70 cities surveyed registered month-to-month declines while 44 cities witnessed slowing growth trends.  In Beijing, new housing prices rose by 6.8% in February, on par with the previous month while prices in Shanghai grew by 2.3% year-on-year, up from 1.5% in January.  Until most recently, home buyers had rushed to acquire units over fears of more measures in the pipeline. 
At the same time, however, government measures have also served to shut out first-time buyers and pushed up rental prices by about 12% in the first two months.  In the longer run, rental prices should level out as more property owners choose to lease while waiting for better times to sell.  But, the message is clear:  speculators must not be able to profiteer at the expense of the average citizen.
It is with the interests of the general public in mind that the Housing Ministry announced 10 million apartments will be built or renovated for low-income earners this year at a cost of 1.3 trillion RMB (US$198 billion).  Governments at all levels will provide more than 500 billion RMB with the remainder raised by companies and households who will benefit from the program.  The authorities will also introduce favourable policies such as preferential loans, subsidies, and tax incentives to support construction.


Affordable apartments being built in Changsha, Hunan Province, March 18, 2011.  Hunan plans to boost affordable housing to 416,200 units this year from 2010's 262,700, including 261,100 refurbished houses for shantytown residents. 


Premier Wen in his ‘state of the nation’ speech to mark of the opening of this year’s NPC sessions, underscored the government’s commitment to stabilizing prices, warning local officials who fail to do so and do not promote low-income housing construction will be held accountable.  The Ministry of Housing further announced that in conjunction with other central ministries, it would monitor local construction plans and carry out inspections across the country during Q3.  Last year, the government fell short of its target of building 5.8 million affordable homes.