The Guangzhou government's abrupt decision to slash land prices will hurt development as it has cast uncertainty over the city's land policies, say analysts. So far the announcement has not been followed by any details on how the new policy will be implemented. Analysts said it was unwise to cut land lease prices across the board by 25 per cent because prices should be graded according to location. 'There is no specification as to what the new policy aims to achieve,' a Guangzhou analyst said. He warned such a move, if not measured carefully for its impact, could be disastrous to the city's real estate market, which has been in the doldrums for the past 30 months. Substantial Hong Kong capital is being poured into the Guangzhou property market through development projects. Many projects were signed earlier but land costs and related fees have not been fully paid up. Developers remained cautious on how the new regulations would be of benefit to them. 'We are still trying to get more information [about the policy],' said a New World Development spokesman. Guangzhou mayor Li Ziliu announced on Tuesday the government would not only cut land prices but also reduce property-related urban administration fees by 2 per cent. It is not known whether the discounts will apply to development projects that have been approved but construction work not yet started, or to new projects, which officials earlier had said would be banned for the next five years. Projects have been delayed as a result of demolition works on the sites and credit-tightening by banks. Analysts also questioned whether completed and vacant buildings, particularly office developments hit by the property slump, would also benefit. About 26.9 million square feet of office supply is estimated to come on stream between 1991 and 1999. There has been no calculation of what the demand will be. The government is also planning to cut the 6 per cent transaction fee and the 1 per cent management fee imposed on flat sellers. The fees cut is intended to boost the volume of property transactions.
