China Tightens Land Purchase Rules, Bans Villas (Update3)
March 11, 2010, 2:26 AM EST(Closes share prices.)
March 11 (Bloomberg) -- China is requiring a down payment for land purchases equal to 50 percent of a plot’s price and prohibited the supply of land for villas as the government sought to increase affordable housing.
The down payment must be paid within a month of signing the purchase contract, the Ministry of Land and Resources said in a statement on its Web site late yesterday. Buyers must also pay a deposit when taking part in land auctions that is equal to 20 percent of the minimum price for the land.
China’s property prices rose at the fastest pace in almost two years in February, adding urgency to the government’s efforts to rein in speculation and increase the amount of affordable housing. A gauge of real estate developers dropped 0.7 percent today, the steepest decline among industry groups on the Shanghai Composite Index.
“In the short term, we are cautious particularly if there is any policy launch after the People’s Congress,” Joseph Zeng, Hong Kong-based executive director at Greenwoods Asset Management Ltd., said in a Bloomberg Television interview, referring to the ongoing annual parliamentary meetings.
Property Prices
Property stocks are the worst-performing group on the Shanghai measure in the past six months, as Chinese officials sought to reduce the risk of asset bubbles, resurgent inflation and bad loans for banks after flooding the world’s fastest- growing economy with cash to drive a recovery. Premier Wen Jiabao warned of “latent risk” in the country’s banks in his speech to the parliamentary meeting in Beijing last week.
Residential and commercial real-estate prices in 70 cities climbed 10.7 percent from a year earlier, the statistics bureau said on its Web site yesterday. That topped a gain of 9.5 percent in January.
To cool speculation, the government in January re-imposed a tax on homes sold within five years of their purchase, after having cut the taxable period to two years in January 2009 to bolster a then-flagging market.
The Land Ministry said in its statement that not less than 70 percent of new land supply should be used for affordable housing and smaller apartments, and that plots for villa construction is “strictly prohibited.”
Land Auctions
Developers have to submit to the land ministry the expected start and completion dates for housing projects and explain in writing any delays. Those that fail to comply will be barred from land auctions for at least a year, the statement said.
Most down payments for purchases of land ranged from 20 percent to 30 percent of the total price previously, the Shanghai Securities News reported Dec. 18, citing Zou Xiaoyun, deputy chief engineer at the China Land Surveying and Planning Institute.
Gemdale Corp., a Shenzhen-based developer, fell 1.2 percent to 13.60 yuan. Poly Real Estate Group Co., China’s second- biggest real-estate company by market value, slid 0.7 percent to 19.77 yuan.
CapitaLand Ltd., a Singapore-based developer that has Chinese properties valued at more than $14 billion, said it is “comforting” that the Chinese government is taking steps to rein in the market, according to a presentation filed to the Singapore Exchange.
Demand in China is “strong” and the real-estate boom can’t be called a bubble, according to the presentation.
Shanghai, mainland China’s financial hub, plans to implement more measures to control property prices, such as introducing a policy for the leasing of public housing, the city’s Communist Party chief Yu Zhengsheng said March 7.
--Chua Kong Ho, Jiang Guo Jiang. With assistance from Luo Jun. Editors: Allen Wan, Reinie Booysen
