Property

Policies Reflecting The Truth Of China’s Property Market

Policies Reflecting The Truth Of China’s Property MarketPositive news have been coming out in the beginning of November, like the news about a developer completing its yearly sales target early and the successful Shenzhen project launch which sold out in six hours for a total of RMB 6 billion and so on. However, according to the National Bureau of Statistic’s figures on the 70 mid to large cities in October, the number of cities with an increase in property price has decreased in October in both the primary and secondary market. The percentage increase in prices in tier-one and tier-two cities are falling and tier-three city prices are dropping. So what is the truth behind all these positive news?

The current government had seldom interfered with the property market directly before. However, since Premier Li’s remarks on the high level of inventory in the property market at the end of October, the country’s leaders have been repeatedly bringing up the issue in different occasions. President Xi first talked about the plan to resolve the inventory problem and to aim for a sustainable growth in the property market during the latest meeting of the Central Leading Group for Financial and Economic Affairs and on the next day, 11th November, Premier Li brought up the need to reform the household registration system so as to improve property demand. Chief Liu then stressed on the issue again on the 12th. These repeated remarks in such a short period of time have been seen as a sign of the property market reaching an alert level.

Besides the six benchmark interest rate cut and five reduction in the banks’ reserve ratio since November last year, there are in fact many more policies implemented to stimulate demand for properties. The recently announced two-child policy has a much more extended effect on the growth in demand than the cuts in required premium. In addition to that, the Chinese government is planning on further stimulating the market by improving the household registration system. The urgency of the issue and the government’s determination to solve the problem is apparent and we may expect to see more stimulus policies on the way in the short run.

However, as discussed in the last issue, most of the current property market’s problems are caused by the high inventory level in tier-three and tier-four cities due to the structural problems within. Short-term stimulus policies are unlikely to solve these problems. It would seem better town planning and appropriate urbanisation must be incorporated as well.