The city government has approved a new plan to offer subsidized loans to low-income, first-time homebuyers, but hasn't said if the scheme is meant to replace or merely complement tax credits for all homebuyers in Shanghai.
The policy will help low-income families buy apartments smaller than 90 square meters and priced below 3,500 yuan (US$422) per square meter. It will also include provisions to stop investors from buying homes with the assistance and then leasing them out.
Government spokeswoman Jiao Yang wouldn't give details yesterday on how the plan will work, but did say it will take effect very soon.
"The preferential policy will enable low- and middle-income families to afford their first home in the booming real estate market," Jiao said.
The government has been criticized in the past for offering tax credits to homebuyers under a five-year program that many argued was geared to the rich and did little for low-income residents. That program ended on May 31, and officials haven't said if they will offer a similar program aimed at middle-class and wealthy homebuyers.
The city's average disposable income was 7,400 yuan (US$891) per capita during the first half of this year, one of the highest in the country but not high enough to keep up with Shanghai's skyrocketing housing prices.
By the end of last year, Shanghai's average housing price had reached 4,553 yuan per square meter. That means that an average family would have to save for 20 years to buy a 100-square-meter apartment.
"The government is trying to balance the benefits to the rich with those of the common people," Meng Jun, marketing manager of Shanghai Stanford Housing Co Ltd, said of yesterday's announcement. "But the limit seems set low and a very small group will benefit."
The previous tax rebate, which went into effect on June 1, 1998, allowed homebuyers to claim a refund on their personal income tax to pay for new homes, meaning the more they earned, the more they got back.
The government hopes the new plan will spur the low-end market dragging down average housing prices across the city.
"We will encourage developers to make more affordable homes for the common people," Jiao said.
Currently, 1 million square meters of affordable housing - meaning apartments priced under 3,500 yuan per square meter - is under construction. Over the next few years, 3 million square meters of cheap housing will be put onto the market annually.
Meng said the policy needs to be support-ed by infrastructure construction as almost all low-priced homes are in the city's outskirts.
"It's impractical to live in the city's suburbs without convenient public facilities connecting the remote areas to downtown," Meng said.
In the past several months, no new apartments priced below 4,500 yuan per square meter were put on the market within the Outer Ring Road.
To further encourage developers to build affordable homes, the government has set aside 38 plots of land specifically for low-priced apartment buildings.