Xi Dada is making of list of which real estate people have been naughty or nice this year
To follow through on President Xi Jinping’s vow of “homes are for living, not for flipping”, China’s primary real estate regulator on Thursday announced penalties for companies which mislead customers and cheat on regulations designed to promote transparency in the nation’s residential housing market.
The announcement by the Ministry of Housing and Urban-Rural Development (MOHURD) listed 101 behaviors that would be considered as dishonest, with noncompliant developers, agents and financial institutions subject to a blacklist which is part of a credit record system that the ministry has established to help govern the sector.
The latest announcement follows a government enforcement campaign kicked off in July, aimed at clamping down on housing speculation by imposing tightened regulation on developers and brokers.
Social Credit for the Real Estate Industry
In the announcement published on November 8th, MOHURD explained that the new campaign would establish a credit record system to punish dishonest behavior, which it blamed for damaging consumer rights, subverting fair market competition, and disrupting the national interest.
The system, which is linked to the social credit framework that China is developing to monitor individuals’ behaviour, aims to track companies’ adherence to MOHURD’s rules and to punish wrong-doers. “MOHURD has established a nationwide unified credit information sharing platform for housing market, which is connected with the National Credit Information Sharing Platform,” the real estate regulator said in the announcement.
China’s National Credit Information Sharing Platform, which also forms the backbone of the social credit systemwhich the country’s government has begun using to track individual behaviour, collects general corporate data such as registered capital, representatives, business activities and financial records, as well as criminal violations. The system also already includes information on compliance with rules on payment of taxes and social benefits, and environmental or work safety violations. And now real estate regulatory compliance.
Reinforcing the Rules
For both developers and agents, behaviour that would be considered as dishonest including publishing false listing information and advertisements — a ban which looks targetted at the common industry practice of creating underpriced fake listings to generate consumer inquiries.
Developers are also forbidden to practice sales bundling, such as requiring buyers to purchase overpriced decoration services or parking space together with new homes, as a way to circumvent price caps on home sales. The announcement also proscribes against developers keeping houses in stock once completed, rather than risk putting them on the market during periods of low demand.
Developers or brokers caught committing these real estate sins would be added to MOHURD’s blacklist, and in serious cases could be banned from future involvement in the sector.
With an eye to ensuring housing affordability, the ministry also indicated that any financial institution or developer which restricts, obstructs, or refuses buyers seeking to purchase homes through their public housing funds, would be added to the blacklist as well. All Chinese wage earners contribute to public housing funds through their paychecks and, while the transactions can be more cumbersome for sellers, the fund provides an important avenue for China’s middle class to buy their own homes.
Institutions or companies found to have cheated on these government rules will be added to a black list, where they would be punished according to the severity of their offenses, according to the statement. Potential penalties include the government limiting the number of new projects that a blacklisted company can take on, being made subject to stricter reviews for project licensing and tightening the capital lending requirements of new projects.
Tighter Enforcement Coincides with Slower Growth
The Chinese government has published a list of regulations to control the home price increases since President Xi Jinping vowed that “homes are for living, not for flipping” at the 19th National Congress of the Communist Party in 2017.
Shanghai, the most expensive Chinese city, canceled four land sales in less than one month this year
In July this year, MOHURD led a group of six other departments in launching inspection tours in 30 cities aimed at ensuring that local governments and business were following rules on home purchases and mortgage lending, as part of an effort to stamp out housing speculation and level out home prices.
The enforcement campaign has had an impact on home prices as data from the National Bureau of Statistics showed that China’s four first-tier cities, including Beijing, Shanghai, Guangzhou, and Shenzhen, saw their average selling price for new homes decrease by 0.4 percent year on year in September. 31 second-tier cities also saw home price growth slow to an average of 1.1 percent — down from a 1.3 percent increase in August.
However, the enforcement campaign has been blamed for lower investment levels and stalled land sales.
Real estate investment in China grew by 8.9 percent in September, compared to a year earlier, down from 9.2 percent year on year growth in August, according to government statistics.
And even China’s largest cities have seen land sales cancelled for lack of developer interest, with Shanghai cancelling a set of four planned land sales worth RMB 5.41 billion in July, shortly after the first enforcement campaign began. Statistics published by data provider the China Index Academy shows the country’s supply of unsold homes has also been climbing, with the amount of unsold homes on developer inventories climbing 4.6 percent in October, in a survey of 40 major cities.
Leave a Reply