China vowed on Friday to build 1.8 million low-rent homes and 1.3 million low-priced houses next year in a bid to curb rocketing house prices. Beijing will also tighten land purchase rules to prevent hoarding, which also drives up the price of real estate.
"The property price surge this year is mainly due to too much speculative buying and inadequate construction of homes for low-income families," Jiang Weixin, minister of housing and urban-rural development, said during a work conference in Beijing.
Five ministries, including the Ministry of Finance and the central bank, announced on Thursday a new policy that sets the down-payment requirement for land purchases at 50 percent of the total price. In addition, property developers must make a full payment for land purchased from the government within one year of the sale agreement. Developers will not be allowed to buy additional land if they fail to meet the requirement.
Analysts said the moves support the Cabinet's announcement on Monday that it will curb "excessive" growth in property prices. Last week, the government said it would re-impose a sales tax on homes sold within five years to discourage speculative purchases.
Property prices in China's 70 major cities rose 5.7 percent year-on-year in November - the ninth consecutive growth of the year, according to the National Bureau of Statistics. In Beijing, Shanghai and Shenzhen, prices have jumped by more than 50 percent in 2009, fueling concerns that a property bubble is building.
"Those combined measures will largely increase the supply in the market and thus effectively curb soaring property prices in some cities," said Carlby Xie, associate director at Colliers' North China division. "Such a quick release of supporting measures also demonstrates the government's determination to cool down the sizzling market."
"The move will tighten property developers' cash flow and thus hold back their impulse to seize overpriced land parcels and prevent them from hoarding land for profits," said Grant Ji, director of Savills (Beijing), a UK-based real estate service provider.
"It is also a very effective way to increase the supply of apartments because property developers have to quicken their sales to get their money back," Ji added.
According to Zhu Zhongyi, vice-chairman of the China Real Estate Association, local governments may also release real estate policies soon to ensure the healthy development of the sector.