Chinese Local Governments Set Out to “Save” the Housing Market
9 September 2008
As the central government is so far refusing to loosen regulatory policies on a real estate market in turmoil, local governments are getting involved themselves, some even seeking to attract consumers by reducing related taxes. But potential home buyers are still watching and waiting, and the trading volumes continue their descent. Real estate developers may at last be coming to realize that they can sell houses only if they climb down from the fabulous prices they have gotten used to.
Subsidy and Tax Exemption in Xi’an
The third day after Xi’an, the capital of Shaan’xi Province, launched policies to “save the market” saw the lowest trading volume this month and the single largest one-day tumble when daily common housing trading volume slumped by 20.51% over the previous day.
According to the new policy, issued on September 4, buyers of an apartment under 90 square meters, or second hand apartment under 144 square meters, will receive 1.5% of the total price as subsidy from the city government. Those who buy an apartment between 90 square meters to 144 square meters will receive 1%, while a buyer of a new or second hand apartment larger than 144 square meters will receive 0.5%. Developers, in the meantime, will enjoy a tax and fee exemption of up to 35 yuan/square meter.
The local media reported that the new policy could cost the local government 516 million yuan, assuming the housing trading volume this year increases by 20% over 2007.
Mr. Yang, an interested Xi’an citizen, found the subsidy unattractive, saying, “It’s better to bring housing price down directly.” He said that while many developers in Xi’an now offer discounts to home buyers, few developers have largely reduced prices. “Many of my friends say housing prices have not been reduced at all.”
More cities want to rescue the market
The real estate market is a pillar of local economies, and a major income source for local governments and officials. With many industrial firms seeing shrinking profits, and some going bust, a slumping real estate market casts heavy financial pressure on local economies. Xi’an is only one of many cities to support the real estate market. In early July, the Nanjing Bureau of Land and Resources suggested reducing land transfer fees for a single piece of land, and payment term for lands with high transfer fee.
Local governments are trying everything they can think of to support developers. Some allow people who have already bought apartments to protest against developers lowering prices, requiring refunds if they do. Some are also seeking to maintain high land price by reducing supply and cooperating with developers.
Xiamen and Fuzhou, of Southeast China’s Fujian Province, have adjusted conditions for land transference and reduce the required percentage of apartments smaller than 90 square meters in new construction. The Fuzhou city government said it would allow bargaining over the land transfer fee. It is rumored Guangzhou will also adjust limits on housing area and postpone the launch of low-price apartments.
Henan Province and some cities such as Shenyang and Changsha will lower down payments from 30% to 20%, and raise maximum amounts and terms of housing fund loans.
Both Chongqing and Fuzhou exempt 50% of the contract tax for rural house buyers. Nie Meisheng, chairman of China Commercial Real Estate Commission, said the central government should allow local governments to regulate the real estate market themselves.
This is beginning to look a bit like a war between local governments and their citizens. Governments, officials and their developer friends are trying to keep prices up, and are quite willing to spend tax moneys to do so. Buyers are waiting for what they see as exorbitant prices to come down. The ball would seem to be in the buyers’ court. A little more patience, perhaps, and developers will be forced into reasonable-ness, and governments can go back to their business and leave the market to work itself out.
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Chinese Local Governments Set Out to “Save” the Housing Market
9 September 2008
As the central government is so far refusing to loosen regulatory policies on a real estate market in turmoil, local governments are getting involved themselves, some even seeking to attract consumers by reducing related taxes. But potential home buyers are still watching and waiting, and the trading volumes continue their descent. Real estate developers may at last be coming to realize that they can sell houses only if they climb down from the fabulous prices they have gotten used to.
Subsidy and Tax Exemption in Xi’an
The third day after Xi’an, the capital of Shaan’xi Province, launched policies to “save the market” saw the lowest trading volume this month and the single largest one-day tumble when daily common housing trading volume slumped by 20.51% over the previous day.
According to the new policy, issued on September 4, buyers of an apartment under 90 square meters, or second hand apartment under 144 square meters, will receive 1.5% of the total price as subsidy from the city government. Those who buy an apartment between 90 square meters to 144 square meters will receive 1%, while a buyer of a new or second hand apartment larger than 144 square meters will receive 0.5%. Developers, in the meantime, will enjoy a tax and fee exemption of up to 35 yuan/square meter.
The local media reported that the new policy could cost the local government 516 million yuan, assuming the housing trading volume this year increases by 20% over 2007.
Mr. Yang, an interested Xi’an citizen, found the subsidy unattractive, saying, “It’s better to bring housing price down directly.” He said that while many developers in Xi’an now offer discounts to home buyers, few developers have largely reduced prices. “Many of my friends say housing prices have not been reduced at all.”
More cities want to rescue the market
The real estate market is a pillar of local economies, and a major income source for local governments and officials. With many industrial firms seeing shrinking profits, and some going bust, a slumping real estate market casts heavy financial pressure on local economies. Xi’an is only one of many cities to support the real estate market. In early July, the Nanjing Bureau of Land and Resources suggested reducing land transfer fees for a single piece of land, and payment term for lands with high transfer fee.
Local governments are trying everything they can think of to support developers. Some allow people who have already bought apartments to protest against developers lowering prices, requiring refunds if they do. Some are also seeking to maintain high land price by reducing supply and cooperating with developers.
Xiamen and Fuzhou, of Southeast China’s Fujian Province, have adjusted conditions for land transference and reduce the required percentage of apartments smaller than 90 square meters in new construction. The Fuzhou city government said it would allow bargaining over the land transfer fee. It is rumored Guangzhou will also adjust limits on housing area and postpone the launch of low-price apartments.
Henan Province and some cities such as Shenyang and Changsha will lower down payments from 30% to 20%, and raise maximum amounts and terms of housing fund loans.
Both Chongqing and Fuzhou exempt 50% of the contract tax for rural house buyers. Nie Meisheng, chairman of China Commercial Real Estate Commission, said the central government should allow local governments to regulate the real estate market themselves.
This is beginning to look a bit like a war between local governments and their citizens. Governments, officials and their developer friends are trying to keep prices up, and are quite willing to spend tax moneys to do so. Buyers are waiting for what they see as exorbitant prices to come down. The ball would seem to be in the buyers’ court. A little more patience, perhaps, and developers will be forced into reasonable-ness, and governments can go back to their business and leave the market to work itself out.
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