China tries to kick start housing sector
Updated
One area where China has tried to stimulate demand is in the housing sector.
As the global financial crisis starts to take its toll in China, the communist government has moved to reduce taxes on the cost of buying a house. But some consumers say the measures are not enough; they're waiting for prices to go down.
Presenter: David Wang
Speakers: Professor Shi Heling, Monash University, Professor Tony Haughton, RMIT University
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WANG: Before the credit crunch, the Chinese government increased taxes in the property sector, in a bit to curb the real estate bubble. But now, the government wants to cut taxes to encourage house sales. In measures targeting first time home buyers, the Ministry of Finance has announced that the property contract tax will be lowered to 1 per cent from three per cent, on purchases of properties that are smaller than 90 square meters. Also, the down payment requirements will be lowered to 20 percent, from 30 percent.
Steven Shi is a young engineer living in Beijing and he just got married this month. But he says he won't be buying a house any time soon - he says prices are still too high:
SHI: I have no plan to buy a property now. Although the housing prices seem dropping in some places and now government have this new policy in place to provide some support, but gaps between different cities are still quite large. Plus the new policy may help people who already have the money, But for people like us, just out of university or just got married, who have little saving, it's still a huge burden to buy a property.
WANG: Steven is not alone. An Internet Poll conducted by a Chinese newspaper website asks people whether they would consider buying a house under the new policies. Sixty seven percent of respondents, said they would not buy in the near future. One comments highlights the problem:
"New policy basically did nothing. We are still worried about the housing price. We will buy when the prices are down. "
Yan Shu li is a lecturer at Business school of Jiang Nan University, who bought a property in March. He believes the policy will not have a big impact until property prices drop.
Li: In my view, this policy will have little impact. The housing prices for ordinary people are still relatively high. Speaking for myself, my income isn't too bad in this city, but I felt enormous pressure when I brought my new property. I had to cut other expenses. I mean, if the real demand is still low, this new policy won't do anything to stimulate the economy.
WANG: Economic professor Shi He Ling from the School of Business and Economics, at Monash University here in Melbourne, thinks the new policy could bring some changes in China's property market. But he agrees high prices are the biggest problem.
LING: The biggest trouble (in Chinese housing market) is obviously starting from last a couple of years the housing price has increased too high. Therefore there are big bubbles in almost every city in China, Shanghai, Shengzhen, hangzhou, etc. There's the outcome of some illegal or corruptive activities between local government officials and real estate developrs. So this caused a lot of troubles and it gave people the impression, the price of house, especially the house or apartment within the town center , are too high. This also causes some speculations that the price will continue to increase. So that's a bit like the stockmarket now around the world.
WANG: Amid the global financial turmoil, China's growth in the third quarter of this year dropped to a five year low. And Professor Tony Naughton, from the RMIT University in Melbourne, says short-term relief will not result from the property tax changes.
NAUGHTON: I think there's no short term fixes in China. Maybe it would be more evident in counties like US where you can dump a lot of money into people's pockets and they can go out start spending. I don't think China's quite in that game now. If there's a stimulus to housing, that's a slower process of course. I am not convinced that there are any great immediate short term benefits.
