BEIJING, July 25 -- Expectations are that there will be more restraining
policies on the property sector over the next half-year due to spiraling
property prices and investment despite government efforts to rein in the sector.
Although implementation of policies adopted last year remains the focus of
2007, soaring property prices could continue to pose a risk in the next six
months, raising the possibility that further cooling measures could be on the
horizon, said Zhu Zhongyi, secretary-general of the China Real Estate
Association.
"The government may launch measures targeting some key cities if property
markets there get out of control. Or it could release uniform policies covering
the entire country," Zhu told China Daily.
According to the National Development and Reform Commission (NDRC),
property prices in China's 70 large- and medium-sized cities climbed by 7.1
percent year-on-year in June, the highest since 2006.
Real estate investment also jumped by 28.5 percent year-on-year, topping
988.7 billion yuan in the first six months. The growth rate was 4.3 percentage
points higher than the same period of 2006 and 1.6 percentage points more than
the first quarter of the year.
"Given the accelerating growth in prices, the government's attitude on
restraining foreign investment in the property market shows no signs of
loosening in the next half-year," said Zhu.
Although foreign investors are not the major driving force in increasing
property prices, their overall impact cannot be overlooked, Zhu said.
With strong capital backing, foreign investors usually offer higher prices
when bidding for land, potentially boosting property prices around the region.
As early as last March, a source with the Ministry of Commerce told China
Daily that the ministry would be more rigorous in its approval process for real
estate projects by foreign investors.
According to Yang Hongxu, an expert with E-house China R&D Institute,
there may be stronger policies in the pipeline. Foreign acquisition of entire
buildings might be prohibited or more restrictive measures may put on
foreign-funded development of high-end properties, he said.
Experts suggest that taxation on buying and selling property should be
reduced or even cancelled.
"A less-developed pre-owned house market, curbed by too much taxation on
transactions, is the crux of the imbalanced market," said Pan Shiyi, chairman of
SOHO China, a Beijing-based property developer.
The government's real estate tax policies, such as the value-added tax and
personal income tax on capital gains from the sale of pre-owned houses, are all
levied in the transaction process, potentially increasing the cost to buyers
when the market's demand far exceeds supply, said Liu Futan, ex-director of the
macroeconomy institute of the NDRC.
While advocating a cancellation on transfer taxes, Liu also called for the
levy of a property tax as soon as possible.
"As a tax levied on the ownership of property, it helps to reduce
speculative investment into the real estate market," Liu said.
Though Li Wenjie, general manager of Centaline China (North China region),
believed the inception of a property tax should be accelerated, he said he does
not think the property tax will come out within the year.
"It involves the interests of so many people and its legislation is a very
complicated process," Li said.
Li voiced his concerns on a property tax. "Should the tax only be imposed
on the second or third apartments or also cover the first one? How about
low-income families?"
As the supply and cost of land are also the catalysts for property price
rises, experts are trying to lower the prices from these directions.
"We are wondering about other ways of reining in property prices," Zhu
Zhongyi said. "For instance, the existing bidding mode could be applied only to
high-end property projects, while common residential buildings could choose
another way, thus reducing the land cost and make buildings more affordable for
average residents."
(Source: China Daily)
