Policy fine-tuning seen to cool property sector

PUBLISHED : Thursday, 08 November, 2007, 12:00am
UPDATED : Thursday, 08 November, 2007, 12:00am

Slowing the strong growth in mainland property prices is a government priority, with more fine-tuning of existing policies and adjustments of market supply more likely than imposition of new policies, analysts say.

Housing prices in major cities increased 8.2 per cent in the third quarter from a year earlier, accelerating from 6.3 per cent in the second quarter, figures released by the National Development and Reform Commission showed.

Prices of new flats jumped 10 per cent year on year in September, 1 percentage point above August's levels.

'I think the central government will fine-tune existing measures rather than roll out new measures before the year ends,' said Wen Lifeng, director of the Policy Research Centre at the Ministry of Construction.

Ms Wen, speaking at a seminar organised by the South China Morning Post yesterday, believes Beijing will modify the execution of land appreciation tax and adjust land supply. She doubted whether a property tax would be imposed soon.

'Hong Kong took 20 years of preparations before imposing the tax ... there are 100 million units of flats in the mainland; it would be very difficult to do the valuation. I don't think it can be executed next year,' Ms Wen said.

Andrew Ness, executive director of CBRE Research Asia, said Beijing might simplify or unify property taxes whose imposition varies from place to place.

He said the government had implemented several measures to streamline the property market this year, such as setting higher entry barriers for foreign companies investing in the sector, raising rates several times and tightening mortgage requirements for buyers of second flats.

The government plans to set up a housing guaranteeing department under the Ministry of Construction to ensure adequate supply of affordable units and low-rent housing.

Local governments are required to set aside at least 10 per cent of income from land deals to fund construction of low-rent houses. Ms Wen and Mr Ness said the measures could relieve pressure on property prices.