Mainland housing reform is expected to be delayed for between six months and two years because the plan is too ambitious and difficult to implement, according to developers and analysts. They say the reforms are unlikely to be introduced soon as many issues and problems have not yet been sorted out. The most pressing problems that need to be thrashed out include the immature mortgage-lending system, low affordability and considerable resistance from government departments and state-owned enterprises. In mid-March, Premier Zhu Rongji called for housing reform to start on July 1 - as a new 'engine' to propel economic growth. The aim of the reform is to stimulate enormous demand by compelling hundreds of millions of people who now enjoy welfare housing to buy their own homes. However, about three weeks before the planned implementation, the reform was extended by anywhere from six months to two years. Developers said the postponement of the reforms was necessary, saying banks needed more time to increase business in mortgage lending, and individual buyers' affordability needed to be improved. Hopson Development Holdings managing director Stones Tse Sai-tung said rushed implementation of the radical plan on July 1 could have caused a severe drop in property sales. According to the reform, state departments would stop buying residential units for employees from the July 1 deadline, and developers had expressed concerns of a sudden shortage of buyers owing to low affordability among individuals. He said state departments with sound financial status could continue to implement reforms, pointing out that the revamp in Guangzhou would be less difficult as household income was much higher than in northern cities. Hopson's land bank is located mainly in the Tianhe district, and its residential units target mainlanders. Mr Tse, however, said reforms of such ambitious nature definitely needed a transitional period of a year or more. 'We also need time to review our marketing and product mix as the market will be dominated by individual buyers in future,' he said. In view of this change to individual buyers, he expected developers would need to upgrade product quality as individuals would be more demanding. 'We have to improve the interior furnishing to lure buyers,' he said. The company planned to build more units at the price level of 4,000 yuan (about HK$3,720) to 5,000 yuan per square metre to tap the growing demand for mid-price homes, he said. Beijing North Star, the property development arm of the Beijing municipal government, said it would not begin new projects in Beijing until the city government released its housing reform policy. The company's future development strategy would depend on the government's policy initiatives. According to Indosuez W.I. Carr Securities, a recent survey in Beijing indicated the capital had reacted negatively to the reform, with 54 per cent of residents having no intention of buying flats under terms announced so far. The strong resistance in Beijing was due to its high property prices. Residential prices within the ring road in Nanjing, the capital of Jiangsu province, were 3,500 yuan per sq m, while in Beijing the price was 8,237 yuan per sq m. Beijing's annual per capita income is only 17 per cent higher than Nanjing's but average property prices are more than double. The capital had sustained high prices as 80 per cent of buyers were state departments and state enterprises, the survey said. However, Indosuez W.I. Carr said a nationwide survey conducted by the State Planning Commission showed 55 per cent of urban residents working for state enterprises and collectively owned enterprises would like to own flats. At the end of last year, these enterprises employed 139 million workers. The survey showed mixed reactions to the reform package, with the greatest difficulties in the large cities. Credit Suisse First Boston analyst Dong Tao said the delayed deregulation of the secondary market as a result of postponement of the reforms was perhaps the greatest depressant on economic growth. Deregulation of the secondary market was critical to creating an expectation of asset appreciation and to mobilising the vast pool of five trillion yuan in private savings, he said. He said the original timetable was too ambitious and had met wide opposition. In addition, the reform process had been hit by slow economic growth and rising unemployment. The central government also real ised that the move could result in people cutting back on spending to accumulate savings for home purchases, he said. Dresdner Kleinwort Benson director Gilbert Choy said the delay had had little impact on the market, but developers would tend to build more low-price homes.