China’s State Council document released on Thursday to further check housing prices reflects the central government’s determination to deflate the property market bubble and stabilize or even lower real estate prices that have been rising for the past few years.

Despite the series of measures the government took last year to rein in housing prices, statistics show that the number of houses sold and prices both increased. A double-digit year-on-year increase in housing prices is not unheard of in major cities such as Beijing, Shanghai and Guangzhou. Housing prices in some provincial capitals, too, have jumped by more than 40 percent.

Compared with the measures adopted last year, which raised the threshold for homebuyers to get bank loans and increased the interest rate on mortgages, the new measures are harsher, raising the down payment from 50 percent to 60 percent.

The latest document stipulates that those who sell their houses within five years of buying them will have to pay income tax, based on the entire income they earn from the transactions.

Besides, the document requires local governments to announce their targets for checking housing prices and report to the central government if they fail to meet them. In the past, the central government only asked local governments in general terms to adopt measures to curb housing prices, but this time it has put real pressure on local officials.

Another measure that will have an impact on the property market is the requirement that land demarcated for renovation of shantytowns and small- and medium-sized commercial apartment buildings should not be less than 70 percent of the total supply of land for the real estate development. Supply of land for building affordable housing units will have to be listed separately to ensure that enough houses are built for lower-income people to rent or buy at subsidized rates.

The document prevents non-locally registered residents from buying houses if they fail to pay taxes to the local government within a designated period.

Apparently, all these measures send a message that the property market should no longer be a paradise for speculators, and that they cannot earn hefty profits by raising prices artificially. If speculators are allowed to play their dirty game, the gap between the haves and have-nots will get wider and make it impossible for ordinary wage earners to buy a house.

Worse, if speculators continue to manipulate the property market, the property bubble will inflate further. And when it bursts, which it has to, it could sink the entire real estate market. That is the last thing any government would want to see.

The new measures are harsh enough to check rising housing prices. The problem is whether local governments will follow them in letter and spirit. If they do, housing prices are likely to stabilize or even drop this year. Coupled with this the building of more affordable houses will solve the housing problems of at least some low-income people.

(China Daily, Jan. 29)