China Begins Round 3 of Housing Rescue, Market Deregulation

Some background in Chinese housing regulations, relevant portion bolded.

Housing Reform and the Housing Market in Urban China
In response to the country’s soaring housing prices, the government launched a series of regulatory policies between 2005 and 2006. On 26 March 2005, the General Office of the State Council (GOSC) issued the Circulation on Stabilising Housing Price (GOSC [2005] No. 8), a notification also known as the old ‘‘Guo Ba Tiao’’. This document was the first to highlight the importance of housing price stability in the form of administrative accountability. On 12 May 2005, seven ministries, including the Ministry of Construction (MoC) and the People’s Bank of China (PBC), issued the Suggestions on Making Efforts to Stabilise Housing Prices, also known as the new ‘‘Guo Ba Tiao’’, reinforcing the government’s housing market regulations (GOSC [2005] No. 26). This raised a series of regulation policy in 2005 that is focused more on restraining the housing demand. As a summary, there are three critical policies issued in 2005. First, the PBC adjusted the preferential mortgage interest rate from 5.31 % to the benchmark long-term loan interest rate of 6.12 %. Meanwhile, it also initiated a lower limited management scheme. Under the new scheme, commercial banks were allowed to give borrowers a maximum discounted rate of 10 % of the benchmark rate, which at the time was 5.51 % (a 0.20 % premium over the old preferential interest rate).

The minimum ratio of down payment was also increased from 20 to 30 % in the places where housing prices grew sharply. Second, house owners who resold their houses within 2 years of occupancy would be charged a sales tax of 5.5 % on the gross re-sale price. Houses sold after 2 years from the date of purchase, however, would be exempt from this sales tax policy. Third, the government stopped re-selling the pre-sale housing units bought by individuals from developers, which increased the opportunity costs of potential speculators, squeezing them out of the market.

After the first round of demand-side regulation policies, the government launched a second round of supply-side regulation and a foreign investment regulation in 2006. On 17 May 2006, the State Council Executive Meeting proposed six measures including the adjustment of housing supply structure, strengthening tax, credit, land regulation and increasing the construction of low-rent housing and ECH (GOSC [2006] No. 37). On 24 May 2006, seven ministries including the MoC issued the Suggestions on Adjusting Housing Supply Structure to Stabilise Housing Prices, also known as the ‘‘Guo Liu Tiao’’ (GOSC [2006] No. 37). This document required that units with floor areas of less than 90 m2 (including ECH) must cover more than 70 % of the total floor area in all newly registered or constructed projects. This policy was similar to that adopted by the Korean government in the 1970s (Kim and Kim 2000). This new rule aimed to increase the small-and-medium sized housing supply in the market and enhance housing affordability for low-to-medium income households.

Furthermore, on 11 July 2006, the MoC issued new proposals to regulate foreign investment in the property market. The proposal stated that foreign institutions and individuals could not purchase apartments for their own use unless the institutions had established branches or representative offices in China and the individuals had worked or studied in China for more than 1 year. The proposal also indicated that foreign developers could only receive the settlements from exchange deals if the principal capital investment was greater than 35 % of the total project investment. This
ensured that foreign developers had no access to further financing if the ‘‘down payment’’ was not enough, because all of the cross-border money transfers were

The government has begun repealing these regulations, with the bolded section on home size being lifted in Sichuan province.

One in the country was carried out 10 years of market policy, some areas are beginning to gradually withdraw from the stage of history, this is the property of the "9070" policy.

The so-called "9070" refers to 2005 for the regulation of skyrocketing property market, the country nine ministries jointly issued the "six countries", which clearly states that "dwelling area of ​​90 sq m room ratio of not less than 70%" policy. After that long-term implementation.

Moreover, including restrictions on non-resident workers and a series of policies relating to the purchase of the property, there may be abolished.

......Recently, Sichuan building housing the Department official said publicly in the past 90 square meters of housing, to be representing the city or a project construction area of ​​more than 70% of the provisions will be suspended.

'Adjustment' 9070 'policies are conducive to optimize product supply structure to meet market demand. "The official pointed out, as to the administration of Sichuan Province, the local government will conduct a housing consumption policy focus on clean, fully cancel the purchase, price, etc. administrative intervention.

According to the Sichuan housing construction sector deployment, currently underway in Sichuan province-wide property to the Chief of Sichuan plan, last year, only 10 or so of the city, the state of the property market introduction of "micro-stimulus" policies extended to the vast majority of the province's cities and prefectures.
The outlook for 2015 remains mixed though.
Insiders pointed out that the bailout measures from the point of view of these places, in June last year to purchase, after last September to the credit limit, this year's third round of stimulus gradually turned to adjust the structure to the inventory, such as Sichuan Cancel "9070" Policy Hainan adjust the proportion of real estate and other types of property are true.

Interestingly, the Minister of the Ministry of Housing, Chen Gao at the end of the National Housing and Urban Construction Work Conference, also said 2014 adjusted the restriction, differentiated credit and other policies, in 2015 to accurately grasp the new situation and the real estate market that appears, new problems, pay attention to the differences between regions, tracking market trends, and actively respond to the initiative as to promote stable and healthy development of the real estate market. Zhang Hongwei, director of research with Tospur Real Estate Consulting, told "China Economic Weekly" that this means that in 2015 the main theme in the property market is still the reduction of inventory.

.......Zhang Hongwei, said overall sales have declined nationwide, but sales growth generally leads housing prices, which means that the survival of small and medium housing prices continue to be compressed, small and medium developers collapse, bankruptcies and mergers and acquisitions will become the new norm.

iFeng: 多省启动楼市去行政化 9070国策开始退出

This is good news for the long-term economy, but also reflects the state of the housing market. Repealing buying restrictions put in place a few years ago didn't work, so older real estate restrictions are being repealed. It also shows the government may be trying anything and everything to reverse the slide in housing before it gives in to monetary stimulus.

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