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China Property

Is China’s People’s Daily trying to talk down housing market by reminding home owners land use rights are on loan from the state?

Renewal of land-use rights is not automatic, says Communist Party newspaper

PUBLISHED : Wednesday, 27 January, 2016, 5:40pm
UPDATED : Wednesday, 27 January, 2016, 7:24pm

The Communist Party’s flagship newspaper has added its voice to the discussion on home ownership, reminding readers that land use rights reverts back to the state after 70 years, in what was interpreted by some analysts as an attempt to calm overheated housing markets in some cities.

An article with the headline “Who owns the houses after 70 years?”, published on the official social media account of the People’s Daily on Tuesday, reiterated concerns regarding home ownership after the 70-year land-use right expires.

On Monday CCTV published a story on social media with a similar title, which was referenced as the basis for a combined report that appeared in the People’s Daily Tuesday.

“China’s land-use rights are only 70 years, which means even if you have freehold title of the house, it doesn’t remove worries over your ownership because the house is on leased land,” said Gong Min, a senior research manager with Shanghai Centaline Property Consultants.

Gong said the timing of the article signals that the government is warning property investors to calm down amid a heated home market, particularly in leading cities.

After the government loosened home buying restrictions that were put in place to help prevent the market from overheating, prices have sprung back with extraordinary vigour, with top tier cities recording prices jumps of nearly 20 per cent in 2015.

Shenzhen, the third largest cities and subbed “China’s Silicon Valley”, saw both new home and second home prices surged almost 50 per cent last year to become the priciest housing market in China.

A Shenzhen government property researcher last week warned of speculative buying and leverage in the city’s housing market and urged for things to cool down.

Gong expects home prices in bigger cities such as Shanghai and Shenzhen to undergo strong growth this year owing to limited supply and positive market sentiment.

The People’s Daily emphasised, as had been communicated in statements from other state bodies, that home ownership is separate from land-use rights, the former is freehold, while the latter is a 70-year lease.

The article highlighted the most asked question, what would happen 70 years later? It answered that land-use rights could be renewed after 70 years upon homeowners application and paying of additional fees to secure renewed land-use rights.

But some experts disagree with such point of view.

Meng Xiaosu, Advisory Chairman of China Real Estate Development Group said residential land-use rights would be automatically renewed according to the country’s “Property Law”.

He added that the government hadn’t made it clear if any fee is needed for renewal.

“It is still a grey area, relevant legislation or clear legal interpretation is needed,” Meng said.

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