Two Chinese cities move to prop up real estate market

Source : Today - 16 Oct 2008

Municipal governments in Shanghai and Hangzhou on China’s east coast have joined a growing number of cities to introduce measures to prop up the sliding real estate market.

For individuals buying their first homes in Shanghai, the maximum they can borrow from the government’s housing fund has been doubled to 200,000 yuan ($43,100), the city’s housing fund management agency said.

The new rules took effect immediately, the agency said in a statement.

The authorities in Hangzhou, the provincial capital of Zhejiang province, also announced a slew of measures, including subsidies for property transaction taxes, to promote the “healthy and stable development of the real estate market”.

The city will also offer residential status to migrants buying homes in the old area of the city, rather than only the new area as previously stipulated, according to a statement posted on the municipal government’s website on Tuesday.

It also relaxed requirements for time of payment by developers for land use and time of completion of real estate projects, easing pressure on developers’ finances.

A dozen second-tier Chinese cities have made similar moves in recent months to support local property markets following concerns that weakening prices and shrinking sales would hurt local governments’ tax revenues. A sagging property market is also likely to add to pressure on the local economy because investment in the real estate sector accounts for more than 20 per cent of China’s urban fixed-asset investment.

Property prices in 70 major Chinese cities fell 0.1 per cent in August from July, the first ever month-over-month price decline since China began releasing the data in July 2005, Dow Jones Newswires reported, citing official figures.