Capital moves to boost low-cost housing supply

PUBLISHED : Wednesday, 05 December, 2007, 12:00am
UPDATED : Wednesday, 05 December, 2007, 12:00am

Within a month of warnings by Premier Wen Jiabao that the country's poor needed more low-cost housing, Beijing has announced a string of measures to boost supply in the public housing sector.

Analysts have applauded the measures and said they would help low-income earners without having an adverse effect on the overall market.

On Friday last week, the National Development and Reform Commission, the Ministry of Construction, the central bank and four other key government offices unveiled a plan titled 'Measures for the Administration of Economic and Affordable Housing', and stressed the intention was to help low-income earners to buy their own homes - a narrower focus than the previous policy target of boosting mid- to low-income housing supply. Also adopted were various measures to ensure effective resource allocation and to combat speculation involving the purchase of subsidised public housing at low prices to fetch higher prices in the future.

Purchasers will now have 'limited property rights' and the apartments can only change hands five years after their original purchase. Even after the five-year threshold, owners will have to share a portion of their profit with the government if they sell.

Those who choose to lease their subsidised apartment will now be required to pay an additional premium to obtain full property rights before leasing is allowed. It is not yet clear what this premium would cost.

The new measures also target profit margins and require private developers who are contracted to build public housing to sell the units at a mark-up of just 3 per cent above their cost, while government departments that build units must sell them at cost. 'The measures will ensure better utilisation of public housing and also that those in need can get the resources,' said Lai Kwok-keung, director and general manager of Centaline (China) Property Consultant.

An analyst at Colliers International in Shanghai echoed the view and said the measures were consistent with Beijing's perspective to prepare for the rising middle class and support those in low-income groups, as announced in 17th Communist Party of China National Congress.

'The policy can help perfect the 'ladder' of the real estate market in the long term, just like there is graduation from the home-ownership scheme to the private market in Hong Kong,' said the analyst from Colliers International.

Under the new policy, the size of economic housing units is limited to about 60 square metres, which will also make the houses more affordable.

Analysts believed that the measures would not have an adverse effect on the overall market since the economic public housing sector was quite independent of other sectors. It could, however, have a positive result.

'Lifting the supply of economic public housing and increasing the cost of speculating has correctly addressed the problem in the real estate market,' said one Beijing-based analyst.

He believed low-income buyers would have greater confidence in the market under the new policy and this would result in a more stable social environment and a healthier property market, which would reduce the pressure on the government to impose more austerity measures in the future.