Price controls urged as property market soars

China Wednesday vowed to continue to curb speculative activities in the property market, strictly restrict house purchases in major cities and expand a pilot property tax program, as a ratings agency forecast moderate growth for property prices this year.

A State Council conference, chaired by Premier Wen Jiabao, said first- and second-tier cities should roll out price control targets on new homes. Meanwhile, a system to evaluate officials' efforts to stabilize housing prices should be established, said a statement published on the central government's website.

For cities with surging home prices, local governments should adopt timely tightening policies such as restricting house purchases, the statement said.

"The recent surging home prices in top-tier cities has raised the attention of Chinese policymakers, and the policy is aimed at preventing the overheating of the property market and stabilizing housing prices," Xie Yifeng, head of the Asia-Pacific Real Estate Association, told the Global Times Wednesday.

Prices of second-hand houses in Beijing have risen dramatically in recent months, especially after the Spring Festival holiday.

The average transaction price of second-hand houses in Beijing reached 27,899 yuan ($4,469) per square meter in January, up 3.9 percent from a month earlier and up 33.6 percent from a year earlier, data from property brokerage Homelink showed.

According to a widely circulated post on Sina Weibo, a house owner claimed she bought a house near Beijing's Sanyuanqiao area for 31,000 yuan per square meter in November, and a real estate salesperson told her Tuesday that her house could now be sold at 45,000 yuan per square meter.

"Second-hand house owners have raised initial offering prices by 15 to 30 percent in the past month. It's crazy," Li Zhen, a potential home buyer in Beijing, told the Global Times Wednesday.

"The State Council's move will help cool down the housing market in the short term, but it lacks details such as the time schedule for the expansion of the pilot property tax program, or specific cities that will tighten restrictions on home purchases," Xie said.

"Housing prices will stop surging in cities like Beijing, but without further measures, home prices will continue to rise moderately," he added.　

"The State Council's statement is only a guideline, and detailed measures to regulate the property market will be released by ministries soon," Yang Hongxu, a researcher from E-house China R&D Institute in Shanghai, said in a research note Wednesday. He expects there might be some new policies launched covering mortgage loans.

Market rumors said China would raise the minimum down payment from 60 percent of the total price of a second home to 70 percent, and that the mortgage loan interest rate for a second home must not be lower than 1.3 times the benchmark interest rate, up from 1.1 times currently.

"If the rumor is true, a house buyer that has a mortgage loan of 1 million yuan will pay 1,000 yuan more per month in interest," Xie said.

Potential home buyers like Li are still clinging to a wait-and-see attitude. "I want to see if there will be any tightening policy to be released after a new central government is formed in March," he said.

Credit ratings agency Standard & Poor's expects China's housing prices will rise moderately in 2013.

"The average selling price in China's 100 major cities will rise up to 5 percent for 2013, and may be even higher in some cities," the ratings agency said in a report sent to the Global Times Wednesday.

"The central government also appears unlikely to introduce much tougher market-cooling measures, provided price rises remain modest," the agency said.

But Standard & Poor's noted that if average selling prices and transaction volumes surge, the government may slightly adjust some measures, and such actions will remain somewhat supportive of the industry, in order to facilitate the economy's orderly recovery amid the ongoing global uncertainty and increasing urbanization.