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Li Keqiang
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Vice-premier vows housing curbs will stay

Li Keqiang

Vice-Premier Li Keqiang has sent a chill through the property market by reiterating Beijing's determination to maintain its tough stance on the housing sector despite tumbling prices in some big cities.

Li's remarks during a 'fact-finding tour' in northern Hebei province added to concerns that prices could fall even further if the government does not ease curbs introduced to cool an overheated sector but which now seem to be weighing heavily on developers and speculators.

'The policies to curb the property market have had certain effects,' Li was quoted by Xinhua as saying.

'But the market is still in a critical stage and we must stand firm, keeping the curbs until prices are effectively controlled.'

Beijing started to rein in runaway property prices at the beginning of the year, with local governments limiting home purchases and banks tightening loan approvals.

The measures have rocked the market back on its heels, with developers, facing liquidity pressure, slashing prices hard to boost sales. That in turn has enraged homeowners, who are demanding refunds.

In Shanghai, developers of unfinished flats have offered discounts as high as 30 per cent to attract buyers. Hundreds of existing apartment owners have protested against the huge price cuts, as the value of their holdings has plummeted, heightening fears of social unrest.

According to the National Bureau of Statistics, 34 of 70 big mainland cities had month-on-month drops in home prices last month, while prices remained flat in 20 cities.

The dire scenario in the housing market led to speculation of a loosening by the central leadership because it was widely believed that Beijing would give priority to social harmony over economic stability. But Li's remarks suggest no let-up.

'The leadership doesn't think home prices have reached a reasonable level,' said Yang Hongxu, the chief researcher at E-House (China). 'It is expected that prices could fall another 10 per cent in the coming two quarters before the government considers any policy loosening.'

In Shanghai, average home prices have fallen about 10 per cent so far this year, Yang said.

The vice-premier's remarks also dashed local governments' hopes of a U-turn by the central government. Local governments rely heavily on land sales to boost their coffers.

On the mainland, proceeds from land sales so far this year have dropped 70 per cent compared with the same period last year, according to a report by Mizuho Securities.

Li in fact urged local governments to step up efforts to build affordable homes for low-income residents, as a way of combating the economic slowdown.

As underprivileged residents secure cheaper flats, they will save more than they spend, hence stimulating consumption, he said.

The government plans to build 36 million affordable homes by 2015 to help people on low incomes.

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