China property policies undergoing renovation
Most Chinese cities have relaxed controls, but a new property tax looms
Mainland cities that have scrapped home-purchase restrictions are likely to have abandoned such controls once and for all, industry experts say, as top authorities speed up reforms aimed at the adoption of more market-oriented measures to curb housing speculation.
In the past four years, 46 major cities imposed restrictions to make it harder for non-local residents to buy homes or for locals to purchase multiple homes.
In 2010, the mainland's property market had shrugged off a brief downturn during the global financial crisis and home prices were soaring.
Now, about half a year into a new correction, most of them have either relaxed or lifted such measures.
While some debate when and how the remaining few, especially the first-tier cities of Beijing, Shanghai, Guangzhou and Shenzhen, will relax such controls, others are asking whether they will come back.
"It's almost certain that China will not resort to such government interventions again," said Li Enping, a senior researcher at the Chinese Academy of Social Sciences, a top government think tank in Beijing. "The alternatives should be fiscal and tax measures.
"Although detailed policymaking at the central level is not clear, the direction of reform is towards more market-oriented measures."
Such reforms have long been pursued, without the achievement of a breakthrough. Investors are now looking to President Xi Jinping's government, hoping it will take some crucial steps in economic and political reforms.
Pan Jun, chairman and chief executive of mainland developer Fantasia, said last week: "It would be best for the industry if developers are given a stable, normal and market-ruled environment. Even if we fail, we'll then accept it."
Pan said the mainland was moving in that direction and he remained cautiously optimistic about the trend.
A lot of the mainland's wealth is stored in the property market and those in possession of such fortunes, be they corrupt officials or rich families, are resisting efforts to levy withholding taxes on properties.
They were lobbying top policymakers and warning that such taxes would result in a disastrous collapse of the real estate market that would also damage the broader economy, Li said.
But if home prices started to soar again after the lifting of restrictions, the top authorities would be even more determined to roll out such taxes, he said.
The mainland has been testing a new property tax in Shanghai and Chongqing since 2011.
While the effectiveness is still hotly debated, the formulation of a law based on the trials has begun.
Jia Kang, a top tax adviser at a Ministry of Finance think tank, told a recent forum that the property tax law could be approved and imposed by 2017 at the earliest.
Li said the next three to five years would give those owning multiple homes the opportunity to sell down their properties, thus reducing the obstacles to the levying of such a tax.
However, he said first-tier cities would need to retain some sort of home-purchase restrictions so that people would not flock to them.
Xu Wei, a senior researcher at the China Centre for International Economic Exchanges, another top government think tank in Beijing, said people should not be bothered too much by purchase restrictions any more as the days of rampant speculation in the mainland property market were gone.
"Home prices in first-tier cities are very high now and unaffordable to ordinary buyers," she said. "Localities should be given the freedom to impose measures in line with their respective situations."
Property market divergence has increased across the mainland, with many small cities suffering acute oversupply while a few others have outperformed due to strong demand or limited supply.
Xu suggested developers conduct more research into fundamentals including the local economy and population, while keeping an eye on policy changes.
"It is not necessary to decide for now whether we should reinstate home-purchase restrictions in the future," she said.
"While acknowledging the market's role, we should not totally deny the function of government policies."