China's new leadership unlikely to roll out new property curbs, analysts say

Analysts say China's new leadership is unlikely to roll out further property cooling measures, focusing instead on enforcing existing ones

PUBLISHED : Friday, 01 March, 2013, 12:00am
UPDATED : Friday, 01 March, 2013, 4:58am


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China's new leadership is unlikely to introduce new curbs on the property market but will focus on enforcing existing measures, analysts say.

They forecast stable growth in property prices after the annual meetings of the National People's Congress and the Chinese People's Political Consultative Conference next month.

The property market has been among the key topics at the annual meetings since 2010, after mainland property prices started to rise rapidly in 2009, surging by more than 20 per cent that year.

"I don't expect the new leadership to mention new property measures at the meetings," said Winnie Cheng Yun, research director at realtor Centaline Group. "Actually, some existing measures have been repeated again and again over the past few years." The existing measures, reiterated in a State Council announcement on February 20, include expansion of a property tax trial, restricting purchases of second homes and increasing the supply of land and housing.

Premier Wen Jiabao had pledged to rein in the property market at the past three NPC meetings. "The [housing] price should be considered according to people's incomes, and what I want to say is that the current price is far beyond that level," Wen said at his post-NPC announcement last year.

At the same event in 2011, Wen said Beijing would control liquidity to "eliminate the monetary basis for rises in housing and food prices". And in his government work report in 2010 he vowed to "resolutely curb soaring housing prices".

Cheng said Beijing's measures in the past few years had been effective in curbing rising home prices and speculative activity. "However, amid rising inflation and a growing economy, it's very difficult to see a decline in home prices," she said, adding that home prices would maintain stable growth this year.

However, amid rising inflation and a growing economy, it's very difficult to see a decline in home prices

Zhang Hongwei, research head at real estate consultancy Tospur, said home prices would continue to grow slowly, following positive momentum since the second half of last year.

"I think government officials will not describe home prices as 'unreasonable' in this year's meetings, as the home price growth is actually in line with the country's recovering economy," Zhang said.

Lu Ting, China economist at Bank of America Merrill Lynch, said the increasing number of rural workers moving to large cities due to urbanisation had boosted demand for housing.

"Also, due to rising salaries and raw material costs, it's not realistic to expect home prices to go down," he said.

"There is no room for the property prices to drop, but of course prices are unlikely to see substantial rises because the government is sensitive about growth. I expect a slight increase in home prices this year."

Lu said he expected Beijing would address its concerns about the property market in its work report or at news conferences on the sidelines of the two meetings, but agreed that new measures were unlikely.

Growth in home prices had slowed in the past two years, showing that the existing measures were having some effect, Lu said.

Data from the National Bureau of Statistics shows that mainland home prices rose by 6.8 per cent in 2011 and by 7.7 per cent last year.

They rose by 145 per cent between 2003 and last year, from 2,359 yuan (HK$2,909) a square metre to 5,791 yuan a square metre, with growth in some major cities far higher than the nationwide average. Average prices in Beijing rose 365 per cent to 20,700 yuan a square metre, while Shanghai's rose 341 per cent to 22,595 yuan a square metre.

"I hope that the government can strengthen enforcement of the existing measures in the coming months," Lu said. He added that while some measures, such as limits on purchases of second homes, had been enforced effectively, there were still some loopholes that Beijing could look into.

Cheng said some local governments had failed to enforce Beijing's austerity measures because a lot of their income came from the property market.

She said the new leadership should map out a long-term target to boost housing supply, especially affordable housing.

Premier-in-waiting Li Keqiang used to be responsible for affordable housing policies, and Cheng said more measures to address the issue could be expected.

She said affordable housing policies had not been enforced strictly by Wen's administration, adding that she hoped the new leadership would do so.

Beijing's 12th five-year plan set a target of building 36 million affordable homes, but Lu said strict enforcement would be needed to ensure they were allotted fairly and transparently.