One-size-fits-all model for housing policies gets rethink

The central government is widely expected to give local officials on the mainland more say in deciding property policies as markets become increasingly polarised.

Home prices are still soaring by more than 20 per cent a year in the country's top cities such as Beijing and Shenzhen. However, they have stopped rising or even started to fall in some small cities where supply has exceeded demand amid an economic slowdown.

That makes it wise for President Xi Jinping and Premier Li Keqiang to decentralise the mainland's property policies. Otherwise, they could repeat the failure of their predecessors in efforts to rein in housing inflation.

Wuhu, in Anhui province, gives some clues. The city relaxed property tightening measures in August by exempting highly educated buyers from deed tax. Two months have gone, and nothing has happened yet. However, a similar attempt by the city in February last year was immediately halted by the central government.

Wuhu was not the only city to have relaxation attempts stopped in the past two years, and nor is it the only city to get consent this time around.

Wenzhou, an entrepreneurial city in Zhejiang province hit hard by weakening exports and slowing investment, was the first to ease property tightening measures in August. It allowed families with no homes to buy two, instead of just one.

Both cities intended to stimulate housing demand after declines in property transactions. Home prices in Wenzhou have been falling for two years.

Meanwhile, other cities have stepped up their efforts to cool down their frothy real estate markets.

Beijing last month announced a plan to increase land supply to build apartments for self-users, while Shenzhen raised deposits for families buying second homes.

In the past decade, property tightening and relaxation have never co-existed on the mainland. The usual practice was for the central government to issue guidelines first, followed by detailed measures for implementation from each city. Any counter-action was not tolerated.

The former cabinet, led by Wen Jiabao, also narrowed financing channels for developers. It virtually stopped approving any plan for property companies to float their shares on the stock markets, and also told banks to be strict on loan approvals.

Such measures remain in place, as the new government has yet to pin down its strategies to engineer a soft landing for the real estate market. Too much hinges on the property industry, which affects more than 40 other sectors. Any crash would bring down the whole mainland economy and affect growth in many countries, such as Australia, that depend heavily on Chinese demand.

The roadmap is expected to be unveiled during the third plenum of the Communist Party's 18th Central Committee, which will begin on Saturday.

People expect the central government will allow local officials to come up with their own property measures, as long as home price inflation is within a comfortable range. There is no cure-all in a country of 9.6 million square kilometres for an industry in which location determines price.

Observers also expect the leadership will take a different approach in arresting home price rises, by increasing supply, instead of curbing demand.

Local differences are also reflected in the strategies of developers. They had recently been enthusiastic about the smaller cities, but with demand limited there, they are now switching their focus back to the top cities - such as Beijing, Shanghai, Guangzhou and Shenzhen - where demand seems insatiable.

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