Local governments get more say in real estate

PUBLISHED : Tuesday, 23 December, 2008, 12:00am
UPDATED : Tuesday, 23 December, 2008, 12:00am

In a move to stabilise falling home prices nationwide, Beijing will give local governments more flexibility and power to support their property markets.

While they must implement the central government's policies, local authorities, based on their own needs, could introduce measures to encourage spending on housing markets and develop welfare housing for the low-income group, the State Council said on Sunday.

The announcement came after Beijing last week announced measures, including tax reductions and loosened credit, to boost the ailing real estate market.

Under the policy, lenders are encouraged to facilitate mergers and acquisitions among developers and provide credit with preferential interest rates to developers of low and mid-tier housing.

The measures also include expanding the eligibility of the transaction tax exemption and providing preferential loan for second-home buyers if they live in smaller than average-sized flats.

Sunday's announcement said these preferential measures would last until December 31 next year. However, the follow-up measures failed to boost the share prices of mainland developers, which fell yesterday after strong rallies last week.

Hopefluent Group Holdings, the biggest property agent in Guangzhou, dropped 19.73 per cent to close at HK$1.18.

KWG Property Holding declined 8.3 per cent to HK$2.43 and China Aoyuan Property Group slid 3.48 per cent to HK$1.11.

Hopson Development Holdings closed with a loss of 3.16 per cent at HK$5.82.

Guangzhou R&F Properties fell 2.9 per cent to HK$8.72.

China Overseas Land & Investment, a developer controlled by the construction ministry, inched down 2.08 per cent to settle at HK$11.32, while China Resources Land shed 5.93 per cent to end at HK$9.52.

Credit Suisse said in its latest report that it expected Beijing to continue rolling out measures to support the sector until some signs of stabilisation were seen, particularly in transaction volumes.

Home sales dropped 20.6 per cent in the first 11 months of the year from the same period last year, according to government data.