Policy direction

The government has issued policies aimed at stimulating the property market. Last October, the central bank cut interest rates to help boost the real estate market. Then in November the Treasury Department along with State Administration of Taxation removed land value-added tax and stamp duty for home purchases. Meanwhile, the central bank announced that the down payment was cut by 20%.In Shanghai, the government made bolder encouragements in the policy adjustment, especially in the trading of second-hand homes.

Shi Liang, Property Agent:“The government policies do work especially for those houses, which are sold less than 2.45 million RMB. The contract tax was reduced to 1 percent. The floor for interest rates was lowered to 70 percent.”

A: There have been some government policies put into effect, are any of these working? Or when can we see some of these begin to work?

S: This is really all helped buyers and it’s made the process of actually buying a property that much cheaper for buyers. And we have seen interest within the market in terms of buyers because of these policies. I feel that, right now, the government has really acted quite quickly in terms of pushing out these policies. And they have been quite effective policies. It just so happens though, you know, we are in a downturn, we haven’t seen the bottom of the market, and possibly, more policies might be required as we go into this year. Things like, for example, maybe dropping off in the interest rate as well, further dropping off.

A: Some people have even voiced concerns that the government shouldn’t get involved in real estate at all, what are your thoughts?

S: I feel it’s quite ok for the government to get involved in real estate, because it’s important to protect the individual buyer. For the past few years, we’ve seen the real estate prices in China, in Shanghai really rise way out the reach of certain buyers. And the example in Shanghai is the lower grade white-collar worker, it’s important for the government to realize the difficulties that some of these workers have in terms of buying residential property. And also, it’s beneficial for the economy as a whole. In order for Shanghai’s economy to grow, these lower grade white collar workers, they need obviously good housing to be made available for them within the city, so that further white collar workers will be attracted to the city, to live and to work in the city, and so the economy will grow. And it’s not just property market policies as well, that the government can help out. It’s also, in terms of the residential property market, they can also help out in terms of building up the transportation infrastructure within the city. And again, the government is definitely moving forward on this. When I first came to Shanghai in 1997, there’s only one line, line1, now you have around 8 to 9 lines within the city. These lines are going to be centered within the city center, but then they radiate out towards the suburbs, and I think it’s really important because when the lines are radiating to the suburbs, then you’re going to have satellite towns, dormitory towns, being developed. And further out, you go from the center, the cheaper land prices are, the more affordable housing will be for the white collar workers. So they’ll be able to live further out, but commute into the city much more conveniently. That’s another way the government is helping out and can help the residential property market.

A: Let’s talk about the sessions that are coming up. Is there anything governmental policy that could be coming out of that could help the buyers and the market?

S: I feel that we’re still sort of in waiting and looking at the effects of the policy on the market. There are buyers that are more attracted to the market since those policies have come out. But again, we’ve got to see what the economy is doing. If the economy continues to decrease, that’s going to have an effect on the residential property market. If the residential property market continues to decrease, I feel that the central government could well issue more policies. But right now, I don’t hear any talk of policies, new policies or new policy initiative on the table right now.

A: Let’s talk a little bit about consumer confidence, because I know you said before consumer confidence is really what we need to get the housing market moving again.

S: Confidence is the key in any market. In terms of the residential market, again, how can you drive consumer confidence? Government policies obviously can drive or help to boost consumer confidence, but again the residential property market is linked to the economy, and right now, some people might, could well be worried about their jobs, and if they are in the market for buying residential housing, they might hold back in terms of buying a property, because they might be sort of feeling unsecured about their jobs, and this is a fact to bare in mind right now.

While the real estate market continues to lag and will likely get worse before it gets better. It’s not all bad news for everyone. If you are a first time investor or looking to buy, keep your eyes peeled. There are deals out there, and more are likely to pop up as prices continue to come down.

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