It will build 8 million units for 2012, 20% less than initial goal, in a move that may disappoint investors
Reuters 12 August 2011
China has cut its target for the construction of public homes by 20 per cent to eight million units for next year, two sources said, tempering expectations for builders to support economic growth in coming months.
The rollback in public housing plans may disappoint investors counting on massive spending in the ambitious building project to power China’s economy in the coming months, when softening US and European demand are expected to drag on Chinese exports.
But for some analysts, Beijing’s drive to build millions of subsidised homes was always too ambitious and unrealistic to start with, and a lower building target does not necessarily dampen the outlook for the world’s No 2 economy.
Two sources close to China’s government on Wednesday said that Beijing has curtailed its plans for state-subsidised homes, with one source saying this was partly because Beijing needs more time to assess the amount of investment needed.
A planned reshuffle in China’s leadership in 2012 had also motivated China to lower its construction target, the source said, without elaborating.
‘The construction of state-subsidised homes still requires another round of assessment of market needs,’ the source said.
Keenly aware that record home prices has become a sore point for many ordinary Chinese, Beijing wants to build millions of affordable homes lest high prices stir social unrest.
Under its original plan, China had aimed to build 10 million homes a year in 2011 and 2012. By 2015, Beijing had hoped to start building and redeveloping 36 million public homes at a cost of over four trillion yuan (S$759 billion).
Official data this week showed that China’s annual real estate investment growth quickened a shade to 34 per cent in the first seven months from a year earlier, from growth of 33 per cent in the first six months.
In theory, the massive investment should be one of the pillars supporting over 50 industries, from steel to consumer electronics.
But in reality, a funding shortage and bureaucratic delays had caused construction to fall behind schedule, leaving analysts to question the extent of building activity that is actually happening on the ground.
Patchy data on just how many public housing projects were started or completed adds to the confusion, too.
‘I am not surprised by the news at all. The previous target was too high to be reached,’ said Hui Jianqiang, the head of research at E-house China in Shanghai.
That fewer public homes would be built is unlikely to hurt China’s overall fixed asset investment as possible increases in commercial real estate projects could offset a contraction in the spending of government-subsidised housing, Mr. Hui said.
Even though Beijing urges developers to build public homes and support social goals, it forces local governments and builders to pay for 90 per cent of the cost. It has ordered local governments to guarantee funding for the building of public homes either by dipping into land revenues or allocating special funds and budgets.
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China cuts public home building target
It will build 8 million units for 2012, 20% less than initial goal, in a move that may disappoint investors
Reuters
12 August 2011
China has cut its target for the construction of public homes by 20 per cent to eight million units for next year, two sources said, tempering expectations for builders to support economic growth in coming months.
The rollback in public housing plans may disappoint investors counting on massive spending in the ambitious building project to power China’s economy in the coming months, when softening US and European demand are expected to drag on Chinese exports.
But for some analysts, Beijing’s drive to build millions of subsidised homes was always too ambitious and unrealistic to start with, and a lower building target does not necessarily dampen the outlook for the world’s No 2 economy.
Two sources close to China’s government on Wednesday said that Beijing has curtailed its plans for state-subsidised homes, with one source saying this was partly because Beijing needs more time to assess the amount of investment needed.
A planned reshuffle in China’s leadership in 2012 had also motivated China to lower its construction target, the source said, without elaborating.
‘The construction of state-subsidised homes still requires another round of assessment of market needs,’ the source said.
Keenly aware that record home prices has become a sore point for many ordinary Chinese, Beijing wants to build millions of affordable homes lest high prices stir social unrest.
Under its original plan, China had aimed to build 10 million homes a year in 2011 and 2012. By 2015, Beijing had hoped to start building and redeveloping 36 million public homes at a cost of over four trillion yuan (S$759 billion).
Official data this week showed that China’s annual real estate investment growth quickened a shade to 34 per cent in the first seven months from a year earlier, from growth of 33 per cent in the first six months.
In theory, the massive investment should be one of the pillars supporting over 50 industries, from steel to consumer electronics.
But in reality, a funding shortage and bureaucratic delays had caused construction to fall behind schedule, leaving analysts to question the extent of building activity that is actually happening on the ground.
Patchy data on just how many public housing projects were started or completed adds to the confusion, too.
‘I am not surprised by the news at all. The previous target was too high to be reached,’ said Hui Jianqiang, the head of research at E-house China in Shanghai.
That fewer public homes would be built is unlikely to hurt China’s overall fixed asset investment as possible increases in commercial real estate projects could offset a contraction in the spending of government-subsidised housing, Mr. Hui said.
Even though Beijing urges developers to build public homes and support social goals, it forces local governments and builders to pay for 90 per cent of the cost. It has ordered local governments to guarantee funding for the building of public homes either by dipping into land revenues or allocating special funds and budgets.
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