Restrictions to be scrapped after national database set up: minister

SHANGHAI / BEIJING - Restrictions on home purchases will be scrapped following the completion of a national database of property ownership and other related information, a top housing official said on Thursday.

Jiang Weixin, minister of housing and urban-rural development, said in Beijing that the restrictions, introduced earlier this year, were "administrative" measures to cool down the property sector.

"We introduced restrictions because that was the best choice," he said. "To some extent, the restrictions have proven effective."

While admitting that limiting home purchases was the "last resort" of the government to curb rising property prices, Jiang told lawmakers during an inquiry meeting that the restrictions will be "phased out" upon the establishment of a national housing information system.

Jiang said that two years ago the ministry started collecting information in 40 selected cities, hoping to set up an information system that covers urban areas.

The database is designed to increase the transparency of the property market. Greater transparency should help prevent excessive price swings resulting from speculation by people with inside information, experts said.

By establishing such a system, Jiang said, the government can get a basic idea of the property status of an individual as well as his family members.

"We will set up a system in the 40 pilot cities first, and later the network will be expanded," he said.

However, some experts said the database does not necessarily mean that the government will ease curbs on home purchases.

"It will take a long time to compile a complete database. Even after it is set up, it will have nothing to do with ending the curbs," said Shi Jiangang, a professor at Shanghai-based Tongji University.

"What Jiang wanted to express is that in future, when people purchase homes, they will be registered on the database. In that scenario, without the current curbs, we can pinpoint who is buying new homes and how many homes a person owns," Shi said.

Transactions are declining in major cities, thanks to the curbs, though housing prices show little sign of falling. Experts are sharply divided about whether tightening measures will continue.

The curbs included a property tax introduced this year in Shanghai and Chongqing and the purchase of second and third homes was restricted in some areas. Down-payment requirements were also increased to control the bubble risk.

During the National People's Congress inquiry meeting, Wu Xiaoling, vice-chairwoman of the NPC's Financial and Economic Committee, and former deputy governor of the People's Bank of China, suggested that current restrictions were too harsh and needed adjusting. Government policy should be aimed at reducing excessive speculation rather than curtailing normal housing needs, she said.

A property analyst said that declining sales were not harming the economy.

"Some experts or analysts have cited a steep slowdown in sales. However, this is not harming our overall economic development," said Hui Jianqiang, research director of Beijing Zhongfangyanxie Technology Service, which provides information on real estate markets.

The overall macro-economy is still sound and GDP growth remained above 9 percent in the third quarter, he said.

"These restrictions are certainly the strictest we have seen in recent history. Nevertheless, the ineffectiveness of previous restrictions meant that the government had to introduce tougher regulations in order to curb demand and bring price growth under control," James Macdonald, head of Savills China research, said.

It is unlikely that there will be a meaningful relaxation of restrictions in the short term as the government is bent on engineering a significant cooling of the market, he said.

At the same time the government has to avoid a hard landing. "Therefore we are likely to see the government being very responsive to market conditions," Macdonald said.

Macdonald expected there will be no meaningful change in regulations in the first half of next year.

He said that the residential property market can be expected to remain relatively weak, with lackluster transaction volumes and a moderate decline in prices.

The government is reviewing the situation before deciding what action to take, an analyst said.

"The government is currently listening to opinions, and it will decide according to international and domestic situations," said Chen Sheng, deputy director of the China Real Estate Index System, a real estate research institute.

The recent slowdown in property prices should be viewed as a market correction and "we are relieved to see that happen because no one would like to see the property market collapse or suffer a hard landing", said Song Huiyong, research director at Shanghai Centaline Property Consultants.