China will use tools including land-use policies and taxation to control property price rises, the government said on Monday, the latest indication of its concern that housing prices could rise too much if left unchecked. The government said it would push for the building of more modestly-priced homes and, in another step to increase supply, would urge the selling of units before construction is completed.
"With a rebound in the property market, some cities are seeing excessively fast housing price rises, and we should pay high attention to this," the State Council, or cabinet, said in a statement on its website. The cabinet added that it was working to thwart speculators but would still support the acquisition of homes by owner-occupiers. China's main property price index rose 5.7 percent in November from a year earlier, though increases have been far steeper in some cities. In Shenzhen, a manufacturing hub near Hong Kong, prices were up 16.6 percent.
To dissuade house flipping for quick profit, the cabinet last week announced that individuals would have to own their homes for five years, up from the previous minimum of two years, to receive a tax exemption on their sale. But it has thus far maintained in place other measures such as discounted mortgage rates that helped stimulate the property market when it was flagging earlier this year.
Most economists are sanguine about China's inflation prospects next year, and a Reuters poll on Monday showed that many also believe the government will be able to stave off a property bubble. But that could prove a tall order in certain parts of the country, especially top-tear cities such as Beijing and Shanghai, said Yonghao Pu, Asia Pacific head of wealth management research for UBS. "The likelihood of bubbles next year is getting larger," he told a media briefing.
The jump in housing prices, though, has aroused fears about broader inflation in China after an unprecedented surge of lending by banks this year and resulting record pace of money growth. Consumer prices returned to positive inflation in November, climbing 0.6 percent year on year, after being in deflation over the previous nine months. Food prices have been the overwhelming source of the rise in overall inflation, jumping 3.2 percent in the year to November.
The National Development and Reform Commission, a powerful central planner, published a statement on Monday in an attempt to quiet some of the worries about inflation. It blamed soaring vegetable prices on a spell of early winter weather, and said that more expensive food did not necessarily portend serious inflation next year.
"We believe consumer prices will maintain basic stability in the near term, and there is little likelihood of serious inflation," the agency said in a statement on its website. It added that China's record money supply growth would not be a source of inflationary pressure, because price levels were restrained by industrial overcapacity and still-weak demand.