China’s weather wasn’t the only thing setting heat records in July, as home prices rose in 69 out of 70 cities, led by a 17 percent year on year jump in Shenzhen and Guangzhou – and this rise in the nation’s real estate temperature seems to all be on account of Xi Jinping.
While the exact cause of the market surge is hard to pinpoint, there are a number of signs that the Xi administration will be taking a more liberal approach to China’s real estate market, and the potential for fewer restrictions on housing prices has encouraged buyers to make new purchases.
Data released earlier this month by China’s National Bureau of Statistics revealed the jump in home prices, which took place despite record setting heat in the eastern and central parts of the nation, and it seems that the country’s melting pavements were no deterrent to buyers eager to snatch up a new dwelling before prices climb still further.
There were already vague signs during July that the new government may be more tolerant of rising property prices, with a statement declaring that China will seek “stable and healthy” development of the property market being released on a government website just after a meeting led by President Xi.
However, the most encouraging statement came earlier this month when an official speaking at the 2013 Bo’ao Real Estate Forum in the southern Chinese city of Sanya indicated that a new approach to regulating the property market could be expected soon.
According to an account from the official news agency Xinhua, Zhu Zhongyi, vice president of the China Real Estate Industry Association told the forum that the new government’s plan for urban development and control of the property sector “will not only adopt economic means such as taxation and credit policies to regulate the market, but it will also create policies to improve the housing and land supply systems.”
The indication that the new government would move towards a more market-driven approach to property, rather than relying on the squadron of administrative restrictions such as third-home purchase bans and higher mortgage down payment rates has apparently been encouraging to both developers and buyers.
It is now believed that the Xi government’s approach to the property market will aim at replacing the policy restrictions with a combination of property taxes and an increased supply of subsidized housing for the poor and middle class.
Shanghai and Chongqing introduced pilot property tax programs two years ago aimed at trying out the mechanism for increasing the carrying costs of real estate speculation and supplying local governments with an alternate means for generating revenue to displace their reliance on land sales to developers.
In what is seen as a further extension of this pilot program, the city of Hangzhou in Zhejiang province indicated earlier this month that it was considering imposing a property tax of as much as 1 percent.
For the past three years the government has been funding development of low cost housing to provide home buying opportunities for middle class buyers who have increasingly been pushed out of the market by speculators. The program is designed to provide modern affordable housing in a manner similar to what Singapore has accomplished through its Housing Development Board programs.