Time to change housing presale system

Shandong province is considering making newly built residential properties available for spot sale, while improving the housing presale system, widely used across the country.

"All cities should improve housing presale management and pick eligible commercial housing projects for spot sales," said Xia Geng, Shandong vice-governor, said at a recent meeting on property market.

Xia's words are viewed as being in line with the central government's call for stricter control of the property market, but some micro-bloggers want the nation to say "no" to the 18-year-old presale system altogether.

"It's urgent to cancel the housing presale system, and not to give anything to the property developers before their houses are completed," one netizen wrote.

According to Xia, the province has been instructed to improve housing presale capital regulations, and those residential projects that don't follow presale capital supervision will not be allowed to start presales.

Xia said a property market supervision group under the State Council, which paid a visit to Shandong from July 25 to 28, stressed the need to improve the province's presale capital supervision system.

China launched the housing presale system in 1994, allowing developers to secure ample capital for project construction with home buyers' down payments.

There have always been concerns that the presale system - which allows developers to receive down payments for unfinished properties - will only fuel speculation in the property market and lead to developers' using the down payments for other purposes.

Despite concern about the presale system, Zhang Dawei, head of research department at Hong Kong-based Centaline Property Agency, said one shouldn't read too much into Xia's words.

"I think we should not overplay the vice-governor's speech. If you read what Xia originally said, you will find 99 percent of his topic is about how to improve the supervision of presale capital, and that's the real point," Zhang said.

The existing presale system for residential property is also controversial in real estate research circles. Some say the system has been detrimental to buyers, who pay a hefty sum of money long before they can live at the property, said Chen Jie, executive director of Fudan University's Housing Policy Studies Center.

"A trial of the spot sale of residential properties will help policy makers better understand the market and make more effective policies. It is also fair for homebuyers because they can own the property immediately after they shell out money," Chen said.

Lu Qilin, research director at Shanghai Deovolente Realty, a Shanghai-based real estate agency, said he doesn't see any possibility of scrapping the ongoing presale system anytime soon.

"There would be huge obstacles in doing so," Lu said. "First of all, from the developers' point of view, such a practice will delay their capital return; second, the presale system truly helps facilitate the construction period of residential housing projects and increases the housing supply; third, local governments are not motivated to do so."

Zhang, of Centaline, agreed.

"Shandong is unlikely to play a role in launching a brave trial of a spot housing sales, and usually the role is taken by first-tier cities," he said.