Economy

Shanghai aims to cool housing sector

By Wang Ying (China Daily)
Updated: 2010-10-08 11:01

SHANGHAI - The Shanghai municipal government issued a new regulation on Oct 7 that took effect the same day, limiting families to the purchase of one new apartment as the nation tries to curb property speculation and soaring prices.

Beijing introduced the same measure on April 30.

According to the regulation, every household in Shanghai is permitted to purchase only one more commercial residential property as of Oct 7 and anyone found in violation of the regulation will not be allowed to register their ownership of the property.

"Speculation is rampant inShanghai's housing market. This new regulation will prove to be a timely and effective means of cooling down the housing market," said Chen Jie, a professor in the school of management at Fudan University who specializes in property research.

According to the regulation, property developers are required to pay value added tax on land, which ranges from 2 to 5 percent.

"This is a strict rule that will effectively press developers to sell their completed projects quicker to increase the cash flow," said Xue Jianxiong, a senior analyst at the estate agency E-House China.

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Chen explained that value added tax on land is based on the property's sale price. The higher the property is priced, the more tax the developers have to pay.

"In the future, few property developers will put the highest price tag on their products, because that would entail the highest rate of tax," Chen said.

"So far,Shanghai's property regulation is the toughest in the nation, which might send a strong signal to the housing market. No speculation is encouraged in the sector," Xue said.

The regulation stated that the city will take the lead in initiating a property tax in preparation for the official property tax to be launched by the government.

Shen Lu, a multinational white-collar worker who purchased an apartment with her husband two years ago, is pessimistic about the new regulation.

"It's like a game of cry wolf," she said. "Every time the housing department announces that it is going to combat housing speculation, the price just soars. If there is solid demand to support the price, no one can solve the problem," Shen said.

Along with the new regulation to cool down the housing market,Shanghai plans to offer 1 million government subsidized homes over the next five years while it continues to increase the available housing stock.