Government may rain on real estate profit parade

• Source: Global Times
• [17:53 March 02 2010]
• Comments

By Xu Huixian

Revenues from land transaction in Shanghai hit a record high in February at more than RMB 30 billion ($ 4.39 billion), according to a report from the Oriental Morning Post Monday. But many analysts doubt the staying power of such profits as new government policies are set to rain on the parade.

“Property developers tend to grab land earlier, as the government is likely to gradually decrease the supply of land in the second half this year,” Xue Jianxiong, researcher with E-house China Research and Development Institute told the Global Times Monday.

The Shanghai government pushed real estate developers to start construction on unused land by releasing a land usage policy in January. The policy, which takes effect on March 22, asks that land be developed within two years of being taken by developers, or they will be taken back by the Shanghai government, according to the Shanghai Municipal Bureau of Planning and Land Resources.

“In practice, the city government, however, tends to deal with such cases mildly, usually issuing notices to push developers to start construction,” Xue added.

Dai Xiaobo, deputy director of Institute of National Economy in the Shanghai Academy of Social Sciences, noted, “The skyrocketing price of land will probably not last long, because some unfavorable policies are underway.”

Shanghai is expected to launch a low-rent housing scheme in the second quarter this year aimed at reducing the colossal rise in the cost of living, according to the Shanghai Housing Support and Land Office.

Dai said that if the low-rent housing schemes don’t work to divert the housing demand, thus curbing the soaring prices, the government may launch a property tax scheme later this year.

A property tax proposal which asks owners of houses pay taxes based on floor space has been submitted for discussion in this year’s National People’s Congress and in the Chinese People’s Political Consultative Conference to be held beginning March 5.