Chinese legislator warns against property speculation
(Xinhua)
Updated: 2006-03-04 11:18

Hong Kezhu, a deputy to the Fourth Session of the Tenth National People's Congress (NPC), China's top legislature, called for taking tough measures to stem frenzied and speculative trading on the property market.

The annual session of the Tenth NPC is slated to open in Beijing on Sunday. As usual, deputies have submitted to the annual session many motions, some of which will be mulled over by the congress and become parts of relevant laws or regulations.

Hong, deputy director of the experts' panel under China State Construction Engineering Corporation, one of China's biggest construction companies, said the low down payment and the pre- completion sales have attracted huge sum of speculative capital into property market, which has sent up property prices and is not conducive to social stability.

Hoping to help solve the problem, Hong has proposed to raise the minimum down payment for mortgage loans from 20-30 percent to 40-50 percent in some parts of the country on a trial basis, and the down payment should be raised to 70 percent for those who buy property for investment only.

Huge sum of capital keeps pouring into the property market due to low down payment threshold, but on the other hand, property prices are still too high for many people since small apartments between 50 and 80 square meters are still in short supply, Hong said.

Many economists have warned that some Chinese cities are building up a dangerous property bubble that will eventually deflate, with severe consequences for the healthy growth of the economy.

Seven ministries and central departments, including the central bank and the Ministry of Construction, issued joint regulations in May 2005 that set out a wide range of measures to cool down the property market, including a 5 percent tax on property owners who sell houses for a profit within two years of purchase.

Some cities have already ordered banning of pre-completion sales and a tightening of land-use rights.

The rate of housing supply is well behind that of the demand as the city speeds up toward greater urbanization, economists said, adding that the property speculation and enthusiasm for property investment are also exacerbating the supply shortage and the high housing prices.

"Housing is a social problem. The government is responsible for helping people get settled and should not leave it totally to the market," said Yan Jinming, a professor at the Land and Real Estate Management Department of the People's University of China.