Focus on cleanup of idle land parcels, ensuring affordable housing, land supply

(SHANGHAI) China will carry out a nationwide property inspection on the implementation of the government’s real-estate measures, the China Daily reported yesterday, citing unidentified people from the property industry.
The ‘large-scale’ inspection will focus on local government efforts to ensure land supply, construction of affordable housing, and the cleanup of idle land parcels, the official English language newspaper reported. The Ministry of Housing and Urban-Rural Development and the Ministry of Land and Resources will carry out the inspections, it said, without giving a timeframe.

‘The government wants to check out the market before setting up next year’s real-estate plans,’ said Liu Kun, a property analyst at Great Wall Securities Co based in Shenzhen. ‘The construction of low-income affordable homes to increase supply will be the government’s focus in the future.’

China is clamping down on land hoarding after record land prices fuelled the risk of a housing bubble. The government last month raised interest rates for the first time in three years, and has suspended mortgages for third-home purchases and pledged to speed up trials of property taxes this year to restrain foreign capital and cool property prices. Prices rose for a 17th month in October, by 8.6 per cent from a year ago.

The central bank ordered lenders last Friday to set aside larger reserves for the second time in two weeks.

China’s government conducts land and property inspections on a regular basis, though they are rarely carried out jointly by the Housing and Land Ministries, Mr Liu said.

China will bar companies that have held land for more than a year without developing it from buying additional plots, seeking a ‘reasonable’ correction in the nation’s home prices, the government announced on Sept 27.

It will increase land available for smaller, affordable apartments in cities with high prices, and no parcel should be used to build large, high-end homes before the supply of government-supported housing is met, it added.

Developers and their controlling shareholders won’t be allowed to participate in land auctions until they’ve taken measures to rectify issues regarding their unused land, the government said in the same statement. The ban also applies to companies found with irregularities such as forged documents.

China found 3,070 cases of land misuse nationwide as of the end of May, with 2,815 of them involving undeveloped plots, Liao Yonglin, land-use director of the Land Ministry, said at a briefing on Aug 19. — Bloomberg

Source: Business Times, 25 Nov 2010

Supply constraint overshadows some of the shorter-term demand problems

(SYDNEY) China could struggle to keep a lid on its property market as urbanisation piles pressure on the major coastal cities, making land scarcer and driving up prices, an executive of international real estate consultancy DTZ said.

‘The speed of urbanisation is very, very fast, which means that they are running out of land,’ DTZ Asia-Pacific chairman Leung Chun-ying told Reuters on the sidelines of a conference. ‘Cities such as Shanghai, Shenzhen, Dongguan, Guangdong, these are the cities of south, they are now all grey on the Google satellite map.’

Mr Leung said that the long-term constraint on supply of new land for development overshadowed some of the shorter-term demand problems, such as a lengthy and inefficient buying process.

The Chinese government has rolled out a slew of measures to tame rapid rises in property prices since April, including higher downpayments and mortgage rates for second homes.

There is also now media speculation that Beijing will impose a property tax soon. But Mr Leung said that in addition to increasing urbanisation, increasingly wealthy Chinese were trading up to bigger homes.

‘We are talking about 30 per cent, 40 per cent, 50 per cent increases in salaries a year,’ he said.

Home prices in some of the Chinese cities went up as much as 30 per cent last year, and the sizzling property market has created concerns about a potential crash in the market.

But Mr Leung said that he does not see a crash, adding that if speculators left the market, real demand would take up the slack.

‘Demand catches up very quickly,’ he said, noting that fast economic growth had also helped to improve home affordability.

He also noted that tight government control of capital inflows and outflows contributed to a stable property market.

‘Capital, including bank lending, cannot leave this crust in mainland China and go back to say Japan, Hong Kong or Singapore quickly, because it’s a closed system,’ he said.

‘Banks are also more tolerant because most of the banks are ultimately owned by the state, and the state does not want to see the market collapse,’ he added.

The ruling Communist Party has identified rising property prices as a threat to social stability as more and more people are priced out of the housing market.

This month, it said that it would intensify efforts to draw factories inland from crowded coastal regions. — Reuters

Source: Business Times, 30 Sep 2010

Chinese premier urges all officials to cool property sector

TIANJIN: Stabilising house prices is a vital task at every level of government in China, Premier Wen Jiabao said yesterday, underlining how concerns about a red-hot real estate market have become the central focus of policymakers.

Runaway property prices are not only a grave threat to the economy, but could also undermine social stability if left unchecked, Mr Wen said in an address at a meeting of the World Economic Forum in Tianjin.

‘It is the key responsibility of all levels of government to stabilise housing prices and guarantee housing availability,’ he said.

China has been trying to curb property prices, which have soared over the past year and threaten to swell into a bubble which analysts warn would endanger its economy.

Beijing has struggled to get growth-obsessed local governments to implement its policies to cool the property sector. Mr Wen’s remarks made it clear that officials will be evaluated on their success in stabilising housing pri-ces, a powerful incentive in the country’s political system.

He also sounded a strongly confident note about the broader health of the Chinese economy and called repeated attention to the country’s role in promoting global recovery from the financial crisis over the past two years.

Speaking to an audience of executives and government officials, he also allayed concerns on regulations which foreign companies worry could put them at a disadvantage in the Chinese market.

He said any China-registered foreign companies would be given equal treatment to local rivals.

He focused on many long-term structural goals of Chinese economic reform: the need to promote domestic consumption, support the development of the lagging interior and ensure a fairer distribution of income.

But his words on the property market stood out as an immediate call to action for China’s officials.

‘The housing issue is not only an economic problem, but also an issue of people’s livelihood that affects social stability,’ he said.

Property prices have begun to stabilise, according to official data, after a crackdown on speculative investment by the government. But local media also reports frenzied buying returning to the market in recent weeks.

There have been doubts whether the government has the resolve to step up its property tightening measures, for fear of triggering a slowdown.

However, Mr Wen’s tone on the overall economy was un-mistakably optimistic, suggesting that Beijing is not about to back down from its real estate policies.

‘At present, China’s economy is in good shape, with relatively fast growth, a better structure, increasing employment and stable prices. In the second quarter and after, some economic indicators showed signs of slowdown, but that was caused by a high base of comparison and government controls. We have the confidence, the conditions and the ability to maintain stable and relatively fast economic growth,’ he said.

Much of the government’s spending last year was financed by bank lending, and analysts say the cost will eventually hit home in the form of a default increase.

But Mr Wen said the banking sector was in a strong position, with an industry-wide capital adequacy ratio of 11.1 per cent and a non-performing loan ratio of 2.8 per cent. He also said that the risks of rapid lending to local governments, though serious, were being brought under control.

REUTERS

Source: Straits Times, 14 Sep 2010

Runaway prices may also imperil social stability if left unchecked, says PM

(TIANJIN, China) Stabilising house prices is an essential task for every level of government in China, Premier Wen Jiabao said yesterday, underlining how worries about a red-hot property market have become a central focus of policymakers.

Runaway property prices are not only a grave threat to the economy, but also could imperil social stability if left unchecked, Mr Wen said in an address to a meeting of the World Economic Forum in China’s northern port city of Tianjin. ‘It is the key responsibility of all levels of government to stabilise housing prices and to guarantee availability of housing,’ he said.

China has been trying to tamp down property prices, which have soared over the past year and threaten to swell into a bubble that analysts warn could imperil the world’s fastest-growing major economy.

Mr Wen expressed confidence about the broader health of the Chinese economy and called repeated attention to country’s role in promoting global recovery from the international financial crisis over the past two years.

Speaking to an audience of global executives and government officials, he sought to allay concerns about regulations that foreign firms worry could put them at a disadvantage in the Chinese market. He said any foreign firm registered in China would be given equal treatment to their Chinese counterparts.

Mr Wen focused his speech on many of the long-term structural goals of Chinese economic reform: the need to promote more domestic consumption, to support the development of the lagging interior and to ensure a fairer distribution of income.

But his words on the property market stood out as an immediate call to action for officials across the country. ‘The housing issue is not only an economic problem but also an issue of people’s livelihood that affects social stability,’ he said.

Property prices have begun to stabilise, according to official data, after a months-long crackdown on speculative investment by the government. But local media are also full of reports of frenzied buying returning to the market in recent weeks.

There have been questions about whether the government has the resolve to step up its property tightening, for fear of tipping the economy into a slowdown.

However, Mr Wen’s tone about the overall economy was unmistakably optimistic, suggesting that Beijing is not worried about the consequences of its property crackdown.

‘At present, China’s economy is in good shape with relatively fast growth, a better structure, increasing employment and stable prices,’ he said.

‘In the second quarter and after, some economic indicators showed signs of slowdown, but that was mainly caused by a high base of comparison and government controls. We have the confidence, the conditions and the ability to maintain stable and relatively fast economic growth,’ he said. — Reuters

Source: Business Times, 14 Sep 2010

(SINGAPORE) A recovery in Chinese property transactions even as price gains slow suggests policy makers will probably introduce further tightening measures, Credit Suisse Group AG said. UBS AG disagrees.

Home prices in 70 major cities climbed 9.3 per cent last month from a year earlier while the value of sales last month rose about 15 per cent to 353.3 billion yuan (S$70 billion) from July. Volumes also increased, data released last Friday showed. The data indicate that real estate investment has yet to slow down, even after the government curbed mortgages and set higher downpayment conditions for some homes earlier this year, said Credit Suisse. Data released over the weekend also showed consumer prices jumped 3.5 per cent last month and new lending rebounded.

‘The government may be prepared to further tighten credits to both home buyers and developers,’ said analysts at Credit Suisse in a report. ‘This is to pre-empt a potential property price surge during the ‘golden September’,’ the analysts said, referring to the traditionally peak season for property sales.

The gain in home prices was the slowest in eight months and values were unchanged from July. Sales were still lower than a year earlier even after the rebound, which may suggest that the data is ‘acceptable’ to the government and investors, and indicate that the chance of additional tightening on the industry is ‘small’, said UBS. ‘Looking ahead, we believe that sustaining the current tightening measures and increased supply in the next few months should help to keep volume robust and prices stable.’

Property stocks have already factored in concerns about policy tightening, according to Citigroup Inc.

Shares of real estate companies are among the worst performers in China this year, with an industry group tracking developers on the Shanghai Composite Index slumping 28 per cent, compared with a 19 per cent decline in the broader gauge. – Bloomberg

Source: Business Times, 14 Sep 2010

(SHANGHAI) The city’s stock of individual mortgages fell by 1.06 billion yuan (S$209 million) in August, the first monthly fall this year, as government efforts to cool down the sector continued to hit home purchases.

The fall came after net new mortgage loans in the city increased by a tiny 270 million yuan in July, compared with a rise of 3.08 billion yuan in June, a slowing trend in pace since the Chinese government launched a campaign to clamp down on sky-high property prices in mid-April.

The Shanghai branch of the People’s Bank of China (PBOC), which issued the figures, did not say how big the stock of outstanding mortgage loans in the city was by the end of August.

The central bank did not comment on housing prices in Shanghai, China’s financial hub, which are regarded as one of the benchmarks for the country’s urban real estate market, together with the capital Beijing and the southern boomtown of Shenzhen.

Local media have reported a rebound in property transactions in major cities including Shanghai in August, with prices largely remaining unchanged despite government cooling steps. — Reuters

Source: Business Times, 14 Sep 2010

BEIJING: China’s property prices last month rose 9.3 per cent from a year earlier, signalling that officials may extend a crackdown on speculators and multiple home purchases.

Average prices in 70 major cities were unchanged from a month earlier. Transactions rose last month, the statistics bureau’s newspaper, China Information News, reported yesterday.

A gauge of property stocks in the Shanghai Composite Index dropped 1.3 per cent yesterday on concerns that the government will implement further tightening measures to deflate asset bubbles. Policymakers have already raised mortgage rates and down payment requirements for second-home purchases.

‘There’s concern that the government may take bigger actions against the property market going forward,’ said chief investment officer Wang Zheng at Jingxi Investment Management Co in Shanghai. ‘A slowdown in price increases isn’t enough and what they want to see is a price decrease.’

Steps could include stopping loans to real estate developers, a compulsory lowering of home prices, and a ban on third-home purchases, the 21st Century Business Herald reported on Wednesday.

The 9.3 per cent increase was the slowest pace in eight months, and less than the 10.3 per cent increase in July and the median 10 per cent estimate in a Bloomberg News survey of eight economists.

The value of sales last month rose about 15 per cent to 353.3 billion yuan (S$70 billion) from July and the volume increased 6 per cent, yesterday’s data showed.

But yesterday’s data ‘may not be consistent with the latest phenomena of surging home sales and record prices for land sales’, which may ‘rekindle the debate on the quality of housing data’, said Hong Kong-based economist Shen Jianguang at Mizuho Securities Asia Ltd.

Data compiled by Soufun.com, the nation’s largest property website, showed that housing transactions in Shenzhen surged 84 per cent last month from July and rose 23 per cent in Beijing, while prices in Beijing gained 12.3 per cent last month over July and rose almost 7 per cent in Shenzhen.

By contrast, the statistics yesterday showed that new home prices in Beijing stayed unchanged from July and costs in Shenzhen dropped 0.3 per cent.

BLOOMBERG

Source: Straits Times, 11 Sep 2010

CHINA’S property prices rose 9.3 per cent in August from a year earlier, signalling that officials may extend a crackdown on speculators and multiple home purchases.

Average prices in 70 major cities were unchanged from a month earlier. Transactions rose last month, the statistics bureau’s newspaper, China Information News, reported yesterday.

Poly Real Estate Group Co and Beijing Capital Development Co led shares of Chinese developers lower on concerns that Premier Wen Jiabao’s government will implement further tightening measures to dampen asset bubbles in the world’s fastest-growing major economy.

Policymakers have already raised mortgage rates and downpayment requirements for second-home purchases.

‘There’s concern that the government may take bigger actions against the property market going forward,’ said Wang Zheng, chief investment officer at Jingxi Investment Management Co in Shanghai. ‘A slowdown in price increases isn’t enough and what they want to see is a price decrease.’

Steps could include stopping loans to real estate developers, compulsory lowering of home prices, and a ban on third-home purchases, the 21st Century Business Herald reported on Wednesday.

The 9.3 per cent increase in August was the slowest pace in eight months and less than the 10.3 per cent increase in July and the median 10 per cent estimate in a Bloomberg News survey of eight economists.

The value of August sales rose about 15 per cent to 353.3 billion yuan (S$69.9 billion) from July and the volume increased 6 per cent, yesterday’s data showed. China Vanke Co, the nation’s largest listed developer, reported a 149 per cent jump in August sales from a year earlier, and Poly Real Estate Group Co, the second largest, said sales almost doubled.

Yesterday’s data ‘may not be consistent with the latest phenomena of surging home sales and record price for land sales’, which may ‘rekindle the debate on the quality of housing data’, said Shen Jianguang, a Hong Kong-based economist at Mizuho Securities Asia Ltd.

Data compiled by Soufun.com, the nation’s largest property website, showed housing transactions in Shenzhen surged 84 per cent last month from July and rose 23 per cent in Beijing. Prices in Beijing gained 12.3 per cent in August over the previous month and rose almost 7 per cent in Shenzhen, according to Soufun. By contrast, the data yesterday showed new home prices in Beijing stayed unchanged from July and costs in Shenzhen dropped 0.3 per cent.

Despite softening price gains compared to 2009, month-on- month figures for prices highlight that challenges remain for policymakers. A 0.1 per cent decline in June was the first in 16 months and prices have now stayed unchanged for two months on that basis.

‘This is a tug of war between the government and property developers and rebounding transactions may back some developers’ resolve not to cut prices,’ said Mizuho’s Mr Shen. ‘It’s the government’s credibility on the line if property prices fail to drop.’

Ken Peng, a Beijing-based economist at Citigroup Inc, warned this week that the government could restrict pre-sales of apartments, further tighten mortgage rules and consider introducing a property tax.

The government may increase mortgage rates and cash downpayments for home purchases and limit individuals to owning only one home if residential prices don’t decline, Jones Lang LaSalle Inc’s Chicago-based chief executive Colin Dyer said on Thursday. A tax on property ownership may be introduced in ‘two to three years’ after study and consultation, he said.

By contrast, Jing Ulrich, chairwoman of China equities and commodities at JPMorgan Chase & Co, said on Wednesday that China doesn’t need additional measures because an increasing supply of affordable housing will dampen prices.

Investment in real-estate development rose 34.1 per cent to 449 billion yuan in August from a year earlier, the statistics bureau newspaper said yesterday. That compared with 33 per cent for July and 36.7 per cent gain for the first eight months. — Bloomberg

Source: Business Times, 11 Sep 2010

BEIJING: Some Chinese cities are preparing fresh measures to tighten the property market as housing transactions and prices show signs of a rebound, reinforcing market expectations that Beijing will not ease its grip on the sector any time soon.

The prosperous eastern province of Zhejiang intends to order developers to park pre-sale proceeds from their real estate projects in escrow bank accounts, according to a document obtained by Reuters on Wednesday.

Major cities including Shanghai, Wuhan and Qingdao are drawing up similar plans, according to state media. The requirement will put a strain on developers’ cash flows as pre-sale proceeds account for about 40 per cent of their funding.

‘Some developers will have to cut prices in the short term to facilitate sales,’ said Mr Cheng Dong, a property analyst with BOC International in Shanghai.

China launched a slew of measures in April to cool the red-hot real estate market, in part to ease popular complaints that many people are unable to afford record home prices.

Sales have shown signs of recovering in recent weeks, as have some prices, and a number of industry analysts warn that Beijing could tighten rules further if developers raise prices during the traditional busy selling season in September and October.

Concern about further property rules tightening was one reason behind a drop in Chinese shares yesterday. Shanghai’s main index ended down 1.4 per cent.

The People’s Daily, the mouthpiece of the Communist Party, said China must maintain curbs on speculative housing demand as the benefits of the crackdown will outweigh the drawbacks.

The paper said the steps – including higher down payments and mortgage rates, and curbs on sales to non-residents – would make prices more affordable for Chinese eager to get a foot on the property ladder, overriding the hit to economic growth.

‘This round of property rules tightening is an important step to improve people’s lives and promote a harmonious and stable society. We must firmly stick to it,’ the paper commented. Its views are usually taken as representing official policy.

If China could increase affordable housing construction, the impact of the tightening on the country’s investment growth as well as on related industries would be short-lived, it added.

The comments were echoed by Mr Xia Bin, a Cabinet adviser, who was quoted by the official China Securities Journal as saying that Beijing would continue with its property rules-tightening drive.

REUTERS

Source: Straits Times, 10 Sep 2010

Chinese government determined to see prices decline: Jones Lang LaSalle CEO

CHINA’s government will issue more measures to curb property speculation because of policy makers’ determination to reduce housing prices, according to Jones Lang LaSalle Inc chief executive officer Colin Dyer.

‘Prices haven’t come down despite the current measures,’ Mr Dyer, who heads the second-largest publicly traded commercial property broker, said in an interview.

‘The government will increase measures as it is determined to see prices decline.’

Housing transactions in cities including Shanghai jumped in August from July, according to real-estate data providers, even after the government intensified a crackdown on speculation in April to cool record price gains.

Property prices in 70 cities rose 10.3 per cent in July from a year earlier, according to official data. Data for August is due to be released as soon as today.

The government may increase mortgage rates and cash down payments for home purchases and limit individuals to owning only one home if residential prices don’t decline, said Mr Dyer, who is based in Chicago.

A tax on property ownership may be introduced in ‘two to three years’ after a period of study and consultation, he said.

Real-estate stocks slumped on Wednesday after a newspaper reported that the government may introduce a second round of measures and Citigroup Inc said extra steps are ‘very likely’.

Further tightening measures may include restrictions on pre-sales of apartments and curbs on the discounts banks can offer on mortgages, Citigroup economist Ken Peng said.

The 21st Century Business Herald reported yesterday that the government may stop loans to developers, force the lowering of home prices and impose a ban on third-home purchases.

The measure tracking real- estate developers traded in Shanghai has plunged 27 per cent this year, the worst performer among the five industry groups on the benchmark Shanghai Composite Index.

Jing Ulrich, chairwoman of equities and commodities at JPMorgan Chase & Co, took the opposite view, saying that government plans to boost the supply of affordable housing will lower prices and additional measures aren’t needed. — Bloomberg

Source: Business Times, 10 Sep 2010