27 September 2010

China Targets Land Hoarding, Pushes Public Housing

The Wall Street Journal

SHANGHAI—China said Monday companies that haven't started developing land more than a year after acquiring a site at auction are banned from making bids in other auctions, in its latest effort to stabilize the housing market.

The Ministry of Land and Resources and the Ministry of Housing and Urban-Rural Development reiterated that local governments must designate at least 70% of land offered in auctions for subsidized public apartments and small- to medium-sized homes, and said in a joint statement those that fail to do so will be barred from offering land for luxury housing.

China has implemented various tightening measures in the property sector in recent months, but data for August showed property prices in 70 Chinese cities rose 9.3% from a year earlier, though they were flat on a sequential basis for the second consecutive month. Some high-ranking officials, including Premier Wen Jiabao and Vice Premier Li Keqiang, have signalled a shift in policy focus to increasing housing supply rather than just damping demand.

Authorities will step up supervision of land allocated for low-cost housing and confiscate any illegal gains made from developing land for the private housing market that was zoned for low-cost housing projects, as well as levying fines, the statement added. Regulators will speed up approvals for subsidized housing projects, public housing and small- to medium-sized homes, it said.

"The government issues such statements to remind property developers to stay in line, especially with housing prices remaining stubbornly high," said Matthew Fang, an analyst from Guosen Securities.

Danny Ma, senior director at China CBRE Research, said authorities might make examples of some property firms but will likely talk to them first if irregularities are discovered.

"It's not the first time the government has tried to curb land hoarding to resolve the imbalance between the supply and demand of homes, with most cities having insufficient supply," he said. "The statement is a signal to the market the authorities will stick to its resolutions on the property market."

Last month, the Ministry of Land and Resources said an investigation during the March-July period found 826 cases of land misuse covering 26.6 million square meters, and said it will reinforce its campaign to crack down on such activities. The ministry said it found 2,815 cases of land being left idle, covering 113 million square meters. A more thorough investigation will be concluded by the end of October, it said.

A People's Bank of China survey conducted in the current quarter showed 36.6% of residents expect property prices to rise in the fourth quarter, compared with 29.4% of residents surveyed in the second quarter expecting prices to rise in the third quarter.

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