Stick With it Warns Jiabao Signalling More Pain for Chinese Housing

As local Chinese authorities continue to back-off from the country's property market restrictions, premier Wen Jiabao reiterates that the controls on the market are necessary and are here to stay...

As local Chinese authorities continue to back-off from the country's property market restrictions, premier Wen Jiabao reiterates that the controls on the market are necessary and are here to stay.

"Property market controls are still at a crucial stage, the task of adjustment is arduous and we must keep policy stable. Localities must pay attention to this point," said Wen Jiabao, in comments reported on Chinese state radio.

"We must strictly implement differentiated housing credit and tax policies, as well as restrictions on home purchases. We must never allow property controls to suffer a setback, or else our achievements through many years of hard work will come to nothing," he added.

Chinese house prices fell 1.2% year on year in April. This was the second consecutive month that prices had fallen year on year after prices fell 0.7% in March.

Local authorities, who have maturing debts and could badly use the proceeds from land sales see the restrictions in a different light. Many have begun tweaking the rules to increase sales, while being careful to maintain the restrictions on multiple home purchases, which are at the centre of the campaign aimed at clamping down on speculation.

A few months ago local authorities were being slammed back into place, but some have recently begun to push their amendments through the central authority, while efforts in Shanghai and a third-tier city of Wuhu were revoked within days.

The restrictions started at the end of 2009 and intensified throughout 2010 as prices continued to surge. With continued growth in 2011 the restrictions were continually deepened until finally starting to take effect towards the back end of last year. Since then prices have continually been pulled down, leading to many protests at developers' sales offices by buyers watching the developers pull down the value of the homes they have just purchased.

Ironically the government's 4 billion Yuan stimulus during the financial crisis is blamed for starting the housing bubble, or certainly not helping the situation. But since 2009 Jiabao has continually voiced his commitment to driving house prices down to a reasonable level.

- Tuesday 22 May 2012

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