China's property policies from the 19th Party Congress


The development direction of China’s property market in the next five to 10 years has been reiterated in the 19th Party Congress. Future policies will follow Chinese leaders’ resolution that ‘houses are built to be inhabited, not for speculation’. Policymakers also confirmed that the current control measures would not be loosened. To ensure a healthy and stable market, long-term policies on different aspects, including land supply, financing, tax and leasing, will be rolled out soon.

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While significant effort will be made to increase land supply especially in first-tier cities, the proportion of land for various land uses will be adjusted. The government will increase land supply to build housing for low- and middle-income households. In particular, land for residential leasing will be increased significantly. On the financing side, the government will continue to gradually deleverage in order to maintain a stable market. The focus of the policy will be on preventing the leverage ratio of households from going up, which means mortgage control will remain in force.

At the same time, the government may speed up the pace on drafting laws on property tax to meet their goal in controlling the increase of housing prices. The tax rate is expected to be low in the beginning and hence the impact on the housing market will be minimal. To encourage leasing activities, a co-existence system for purchase and leasing will be set up. A number of land plots solely for residential leasing are being sold in Shanghai and Hangzhou. Relevant policies to encourage leasing activities may also launch soon.

Under the stringent control measures, the relatively low transaction volume is likely to persist in the coming six months. This may decrease the property developers’ sales this year as well as next year. Given that housing prices in first- and second-tier cities are already at high levels, they may remain flat or even decrease for the rest of this year.

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The National People's Congress and Chinese People's Political Consultative Conference will be held in the first half of 2018. Therefore, control measures are unlikely to be loosened at this critical moment. It is expected that more property market policies will be rolled out in 2018, where property tax will be under the spotlight. Yet, whether property tax is effective in maintaining a healthy market remains a question, as landlords may pass part of the tax to tenants which in turn will increase rents.

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