China Property  Measures  ReviewChinese officials have repeatedly reiterated that they will keep all existing housing measures in place until home prices return to reasonable levels. But after all the efforts the Government puts to keep those measures, including house purchases restrictions, higher down payment levels and tightened mortgage criteria being strictly implemented for nearly three years, home prices has not come down as much as one hoped. In fact, the impacts of those Government interventions have been fading as time goes through. The market has slowly digested those policies and began to show some reviving signs in the second half of 2012.

Thanks to the return of housing demand from end-users and price-slashing strategy from developers, the recovery is gaining momentum in recent months. According to a research compiled by a private property information provider in China, the latest figure indicates a 1% increase in home prices in January – the biggest monthly gain recorded in the past two years.

Although the Government does not set any targets, at least not publicly, the ability of the new Government which took office in November may come into question if housing prices keep soaring. Some analysts and scholars thus speculate fresh housing curbs may be announced in coming March to strike down runaway housing prices. But what exactly can the Government do?

Some speculate that the Government may ban loans from Housing Provident Fund. Housing Provident Fund (HPF) is a scheme designed to help mid-to low-income workers to buy homes. Many cities last year have loosened the upper limits of provident fund loans, meaning workers can borrow more money from the fund. Banning or limiting loan amounts from the fund could effectively suppress genuine demand, but dashing those workers’ hopes of owning their homes not only go against the mass, but is also contrary with the Government’s last year promise to support housing demand of first-time homebuyers.

Property tax pilot program which first introduced to Shanghai and Chongqing in 2011 was once wildly expected to be expanded to other first and second-tier cities this year. But recent media reports quoting anonymous official sources said that the Government may postpone the expansion, due to the general complexity of the property market, the lack of clear property rights and other technical issues.

The Chinese Government has also turned its focus from buyer-side to local governments and developers. Last year, the Government urged local governments to speed up construction of public housing flats. In 2012, about 7.81 million public housing units have started construction, about 6 million were completed, and the total fiscal expenditure on public housing grew up by 13.7% y-o-y to RMB 380 billion. On the other hand, since last June, the Government started to charge property developers 20% of land prices if they leave lands vacant for over one year after the lands are bought. Nonetheless, the effects of those policies will hardly be seen in the near term as property construction usually takes two to three years to be completed.

In point of fact, there is no silver bullet or panacea that can dramatically drag down housing prices without harming the economy. Even if the Government rolls out fresh curbing measures, it will still not be enough to stabilise housing prices as supply of low-priced homes remains tight. The Government is already trying its best to boost supply of small-sized and low-priced flats to meet long-term housing demand from low-income households, but it will take some years before the impacts are shown.