House price curbs start to take effect
By Su Bei (China Daily)
Updated: 2005-06-20 08:43

The government's macro-control measures to stabilize house prices have started working, figures from the National Bureau of Statistics indicate.

The bureau said on Friday that the sub-index reflecting the trend of house prices fell 3.46 points in May compared with April to 107.11.

The average house prices rose 8.9 per cent year-on-year during the first five months of this year, it said.

But prices rose 12.5 per cent year-on-year during the first four months.

During the January-May period, the total area of land by real estate development stood at 60.16 million square metres, a decline of 7.2 per cent.

Gu Yunchang, secretary-general of the China Real Estate Association, said the macro-control measures have gradually been having an impact on the housing market.

To curb housing speculation and stabilize prices, the government has decided to take eight measures including tax policies and stricter land supply controls.

From June 1, the government levied a 5 per cent business tax on the full earnings of home sales, when owners sold them within two years of purchase.

The government also levied a tax on the difference between selling and buying prices of "non-ordinary residential housing", which owners sold two years after purchase.

In March, the People's Bank of China, the central bank, ended the preferential loan policy for mortgages, raising the interest rate on mortgages over more than five years by 20 basis points to 5.51 per cent.

The downpayments for homebuyers in cities where real estate prices rose too quickly were raised from 20 per cent to 30 per cent of the total purchase price.

Qi Jingmei, a senior economist with the State Information Centre, said the most obvious impact of the measures was on people's consumption behaviour.

They believe house prices will drop and are taking a wait-and-see attitude towards home purchase, she said.

Earlier this month, the central bank said Chinese residents' willingness to buy homes had dropped to an all-time low.

Plans to buy private homes in the next three months also dropped to the lowest level.

But Wang Zhao, a senior researcher with the State Council Development Research Centre, said this reluctance would not last long.

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