Despite a booming real estate market last year that saw unit sales more than double the old record, Beijing's mayor is rejecting intervention measures. Confident that prices will stabilize in 2010, Beijing's leaders will turn their attention to creating affordable housing, while targeting developers who scheme to inflate prices by withholding land and stalling projects. See the following article from Property Wire for more on this.
Residential property prices in Beijing are expected to maintain a steady course during 2010 and the city’s mayor has promised not to use administrative measures to intervene in the market.
Mayor Guo Jinlong is in favor of letting the real estate market find its own price levels and said the city would not introduce administrative measures to push down property prices.
The pledge is the first of its kind by a mainland China city mayor and reflects the dilemma facing local and city governments when it came to the issue of curbing demand for property, agents said.
‘They are in a dilemma. On the one hand, strong land sales will give a boost to the city government’s revenue. But on the other hand, high land prices will push up home prices, possibly creating an asset bubble that they do not want to see,’ said Li Wenjie, head of Centaline Property Agency’s Beijing branch.
Land sale revenues for China’s local governments rose more than 60% last year as the country’s real estate market surged and some analysts have warned of the dangers of a property bubble.
Figures released on February 2 by the Ministry of Land Resource showed that local governments generated 1.59 trillion yuan from the sale of 209,000 hectares of land in 2009.
Sales to real estate developers were up 36.7 per cent to 103,000 hectares and land sale revenues for property development hit 1.34 trillion yuan, accounting for 84% of total revenues.
City governments were the major beneficiaries, giving them an incentive to sell land to commercial housing developers rather than rein back home prices, according to Bao Zonghua, former chief of the Ministry of Housing and Urban Rural Development Policy Research Centre.
Li said the strategy of local governments such as Beijing’s would now likely to be a focus on increasing land sale releases to ease the rising trend in land prices.
While ruling out administrative measures to curb price rises, Guo said his administration will crack down on developers who delay the launch of projects and leave land idle in order to try and drive up prices. It would also help low income earners by building or buying 134,000 homes for rent or sale.
It also plans to invest 100 billion yuan, or almost 10% of Beijing’s GDP in 2009, in land development to stabilize the real estate market.
In the absence of any administrative measures such as increases in transaction taxes, demand for mid-market housing would see prices increase moderately, Li forecast. At the upper end of the market, prices were not likely to rise much due to a decline in demand from investors as a result of tighter credit conditions applied by banks. But they would also not see a big correction as supply was limited, Li added.
Beijing sales volumes fell more than 50% in January compared with December, according to the latest research report by Centaline. But prices of second hand homes in the city rose 1.24% over the same period.
Data show that for the whole of 2009 there were 280,000 units transacted in the secondary market and 150,000 new units sold, for a record total of 430,000 units versus the previous record of 200,000 units sold in 2007.
‘But even though latest sales volumes are running at 50% below that of 2009, the market will not be too bad,’ Li said.
This article has been republished from Property Wire. You can also view this article at Property Wire, an international real estate news site.