Amid the flurry of media attempts to parse the assurances of elusive Chinese mandarins, one announcement on Monday from the housing ministry looked like it might actually tell us something about the direction of Chinese economic reform.
Fat chance.
During his State of the Union-esque speech on Friday, China’s premier Wen Jiabao, among other promises, pledged to clear up land issues and stop “prices from rising too fast.”
The concern, of course, is that China’s stimulus-backed mega-lending boom is pumping hot air into the ever-growing property bubble. In January alone, property prices climbed at the fastest rate in 21 months.
So Monday’s housing ministry report – claiming that measures had been successful in reigning property speculation – should have calmed fears.
Housing minister Jiang Weixin pledged to keep prices stable and announced a series of measures to cool extreme jumps in house prices. Jiang also promised to expand social housing construction and maintain a supply for regular commercial housing.
As the FT reported, in China apartments are viewed as assets where few opportunities for other investments exist. Growing rhetoric on housing markets points to just one real solution: a property tax.
But a note today from London-based North Square Blue Oak points out that an anticipated property tax pilot was not a part of the government working report, thus lowering prospects for any serious housing growth dampening:
In addition, the MOF budget report only mentioned it will ‘improve’ the consumption tax and property tax system this year. Although the property tax is a contentious issue, other measures to tighten the property market are expected in due course.
Meanwhile, it looks like it’s back to the status quo of ever-increasing housing prices. Shanghai property stocks were up 1.8 per cent, the most in one week. One analyst at RBS in Hong Kong, David Ng, was quoted in Business Week saying this:
“The thing to watch out for was whether there are new negatives, but it’s the same old stuff that’s been said over the last three months: the government wants to curb excessive price gains, support first-time buyers and attack speculators,” he said.
This brings us back to the starting point, leaving careful China watchers confused as to whether anything has really changed.
Related links:
The soap opera of China’s housing boom – FT
China: more revaluation rumbles – FT Alphaville
China’s Wen plans realty curbs to cool home prices – MarketWatch
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