Regulators can do little to control property prices

PUBLISHED : Monday, 01 May, 2006, 12:00am
UPDATED : Monday, 01 May, 2006, 12:00am

Wu Guoming, development manager

Housing cost increases are expected to ease in the second half of this year under the influence of specific government controls, an industry insider says.

But there is not much government can do to control the price surges.

Authorities have introduced measures in recent months to rein in speculation, including a variable capital gains tax dependant on the resale period and a tightening of land transactions and pre-completion sales.

Wu Guoming, deputy general manager of the privately held Guangzhou Jinan Real Estate Development Company, said government measures usually lagged behind the market and would take a couple of months to be felt.

'I think measures will take effect bit by bit. People won't be able to see the trend until September,' Mr Wu said, adding that the main moves had helped stop some speculators and developers from bidding up the market.

'The trade volume in Guangzhou's housing market was slightly down last month. There was a decline in the rate of price increases after the authorities established the additional tax for buying a second home,' he said.

'Governments in many cities have promised to offer more land for auction this year. This will calm public fears of a lack of land resources, fears that are partly responsible for the price increases,' he said.

But there was no action the government could take that would have a major impact on prices.

Mr Wu said the industry would be destroyed if government continued to impose tough conditions.

'People think real estate developers are criminals responsible for the surge in the market. But actually we don't make the sky-high profits that people assume,' he said. 'The sale price is increasing but the net profit rate in the real estate industry has been the same since the 1990s.