China to further control property market

Housing prices in most Chinese cities will continue rapid increases in the rest of the year and into 2013, according to a government think tank.

The Chinese Academy of Social Sciences (CASS) released a green paper on China's housing sector last Thursday, warning that continued rises in real estate prices and market collapses in some localities will be concurrent for the year of 2013.

The think tank also made proposals on how to tighten the regulations and implement new policies to curb the price rises and avoid "hard-landing" in some cities where housing bubble fears breaking.

Some experts agree to the predictions by the academy while others still cast doubts about the future of the country's property market.

Tightening control to curb rising prices

The academy is worried that many indexes of the country's housing market have shown rising trends in recent months.

According to a report by the National Bureau of Statistics, China's real estate investment rose 16.7 percent year on year in the first 11 months, compared with 15.4 percent in the first 10 months.

Data released by the China Index Academy earlier this month showed that the average new home price in 100 major Chinese cities reached 8,791 yuan (1,397 U.S. dollars) per square meter in November, up 0.26 percent from October.

The capital city Beijing has seen a rebound in the average price of new real estate in recent months, although developers introduced a policy of "cutting prices to add trading volume" in the first half of 2012. In November, 8,300 units of newly built Beijing apartments were sold at an average price of 21,800 yuan (about 3,483 U.S. dollars) per square meter, according to a report released by Beijing Real Estate Association.

The Chinese government has repeatedly reiterated its firm stance on property market control and vowed to keep in place measures such as bans on third-home purchases and property tax trials introduced since 2010.

However, the green paper expressed the CASS's belief that those macro-control policies implemented in restraining speculation in real estate have not achieved optimal results.

Some local governments' loose implementation of the directives accounts for the results. Therefore the liability system should be improved when it comes to housing regulation goals, the paper said.

Contingency mechanism to avoid "hard-landing"

The green paper said real estate bubbles in some cities will burst due to a retreat of investment and speculative funds.

Some small- and medium-scale real estate companies' fund chains will break, which will lead to more unfinished buildings and financial risks in the country, it added.

In those cities, experts believe that contingency mechanism of real estate regulation is needed to avoid the market from "hard landing."

In the meantime, the government should enforce the regulations unwaveringly and consistently, and prepare reserving policies for new challenges in the year of 2013, the paper said.

The report also suggested expanding property tax pilots to more cities and canceling pre-sales of uncompleted residential houses.

Mixed reactions towards the predictions

Many experts agree to the CASS's analysis on the property market. They believe as long as the regulation measures are fully implemented, property prices will be basically stable with a slight increase for the coming year.

"While China's economy keeps a relatively rapid growth rate, and the urbanization is still under way, the real estate market will keep stable growth," said Zhang Dawei, an analyst at Beijing-based Zhongyuan Real Estate.

Yang Chen, commentator with China Economic Net, echoes the suggestions brought up by the paper, but questions the predications as devoid of content.

Saying the risks of price rising and market collapses will be concurrent is the equivalent of saying nothing at all, he said.

The paper should be more specific about the localities where prices will go up or the markets will collapse, and provide more details of the reasons, he said.

A few months ago, property mogul Ren Zhiqiang forecast that housing prices would surge sharply starting March 2013 due drops in developers' stocks caused by declines in their land reserves and a buying spree from March to July.

This has been denied by experts with the CASS at the meeting where the paper was released, calling the forecast as "malicious speculation."