Slow progress in housing reform adds to bubble fears in China
Lack of consensus among policymakers leads to the delay in property registration system
When the central government missed its end-of-June deadline for publishing an ordinance governing the registration of immovable property on the mainland, such as housing, land and forests, it was a heavy blow to hopes that the Xi-Li administration is different from its Hu-Wen predecessor.
The failure came amid rising concerns that major reforms being pushed by the leadership are progressing too slowly, adding to worries about the bursting of the mainland's real estate bubble and an abrupt slowdown in the broader economy.
The ordinance is part of Beijing's efforts to establish a long-term system that will help steer the frothy housing market to a gentler landing, removing the biggest downside risk to the world's second-biggest economy.
The system will also include a punitive tax on mainland families who own too many homes or homes that are too spacious for modest living needs. It is expected to help cut local governments' reliance on land sale premiums to finance their budgets and ease their incentives to push up land prices.
However, before everything else can be achieved, basic data about home ownership is vital. And that makes the ordinance the very first cornerstone of reform.
The missed deadline indicates a lack of consensus among policymakers. The Ministry of Land and Resources, which is leading the effort, has not said whether it has submitted a proposal to the State Council or when it will do so. The cabinet will then have further discussion, possibly sending it back for amendment or posting it online to solicit public opinions.
The lack of progress has added to investors' concerns that the market downturn could run out of control. Property inventories have been building up since late last year and home prices have started to edge back from record highs. A deep contraction in the construction industry has begun to affect the overall economy as developers rush to defend their cash flows.
A roadmap published in March last year on overhauling the various departments under the cabinet clearly stated that the mainland would start a unified registration system for immovable property this year, with the ordinance governing the registration process scheduled to be issued before the end of June this year.
A joint ministerial meeting was held in March, a leading work group was set up in April and a new Ministry of Land and Resources bureau was opened in May to take charge of the job.
On the local level, at least 18 cities and provinces, including Beijing, Shanghai, Zhejiang and Shanxi, have announced they have started to reorganise departments involved in property registration.
However, Tsinghua University's Professor Chen Xiao, who took part in the initial discussions on the draft, told Caixin magazine last week that the ignorance among the drafting departments of the actual operational details of housing registration was one of the main reasons for the delay, along with the need to coordinate among many ministries.
The tricky balancing act was to push ahead with reform without totally overturning current practice, he added. In some cities and counties where the actual registration work is being carried out, the office in charge of housing registration is completely independent from the local housing bureau or the land department.