State Council draws up plan to control soaring property prices

PUBLISHED : Thursday, 18 May, 2006, 12:00am
UPDATED : Thursday, 18 May, 2006, 12:00am

After weeks of hand-wringing over soaring property prices, the central government yesterday announced six measures to cool the overheating property market, with promises to build low-cost housing and punish developers who hoard land or drive up prices.

Analysts said the measures, though moderate, sent a strong signal of the government's concern but that it was too early to tell whether harsher measures would follow. The property market was 'an important pillar' of the national economy, and the government intended to ease prices without applying the brakes too hard, they said.

The announcement of the six measures follows a meeting of the State Council chaired by Premier Wen Jiabao yesterday to study 'ways to promote healthy development of the real estate industry', Xinhua reported.

The meeting came after angry homebuyers became increasingly vocal about soaring prices in major cities with some, including Shenzhen businessman Zou Tao, calling for a national boycott of commercial home purchases over the next three years.

Mr Zou welcomed the news of the measures to be taken. Since Friday he has been in Beijing, where he is hoping to meet Mr Wen and petition him personally. By yesterday, he had met only a middle-ranking official from the Ministry of Construction.

Nevertheless, the State Council appears to have considered at least some of Mr Zou's grievances.

'Some problems in the real-estate sector have not been solved fundamentally, mainly too rapid rises in property prices in a small number of major cities, acute contradiction of irrational housing supply structure, and a chaotic housing market,' Xinhua quoted the council as saying.

The six measures that the State Council plans to adopt are:

New property developments that would focus on cheaper and smaller commercial housing units and rental units for low-income families;

Holding local authorities accountable for controlling property prices and slowing down the pace of demolishing old homes;

Using the levers of taxation, bank credit, and land policies to guide and regulate housing demand, including improving the policy of imposing taxation on housing transactions. Guangzhou and Dalian have already imposed a 20 per cent capital gains tax on buyers who resell within five years;

Regulating the real-estate market by cracking down on property developers who hoard land and housing supplies or talk up housing prices;

Developing a secondary market; and

Boosting transparency in the housing market by improving the disclosure of information on housing development and transactions.

Additional reporting by Raymond Li