Timeline: Important changes in China’s property policy

BEIJING (BestGrowthStock) – China plans to build 5.8 million units of affordable housing for low-income residents this year, which analysts believe will help cushion its economy from the blow induced by a clampdown on property speculation.

Here are the twist and turns in China’s real estate policy over the past two years:

CURBING SHARP PRICE RISES (late 2009-present)

2010

Aug 19 – China urges developers to accelerate property construction so as to increase supply. (ID:TOE67I087: )

Aug 6 – Chinese regulators call for stress tests on loans to a wide range of industries, including cement and steel, whose fortunes are closely tied to the property market, official media said. ID:nTOE67500M]

Aug 5 – Regulators order lenders to test the impact of a fall in house prices of up to 60 percent in key cities and instruct banks to stop extending mortgages to people buying their third homes in four of the cities — Beijing, Shanghai, Shenzhen and Hangzhou.

July – China plans to start levying property tax in 2012 in a pilot programme that will first be rolled out in several cities, local media said.

April 15 – China announces a rise in down payments on second homes to 50 percent from 40 percent. It says banks must charge a minimum mortgage rate on second homes of 1.1 times the benchmark interest rate and it increases down payments on first homes of over 90 square meters to 30 percent from 20 percent.

March 23 – China has ordered 78 state companies whose core business is not property to submit plans to divest from the sector within 15 working days.

2009

Dec 9 – China announces individuals must own their homes for five years to be eligible for sales tax exemption, up from the previous minimum of two years. It also says it will increase supply of lower-cost housing.

U-TURN TO SUPPORT PROPERTY MARKET (2008 H2-late 2009)

Dec 17 – China announces measures to support the property market, including cuts in business and transaction taxes for real estate sales, and policies to make it easier for developers to obtain credit.

Nov 7 – China announces a 4 trillion yuan ($585 billion) two-year stimulus package. A tenth, or 400 billion yuan, is to be used on construction of affordable housing.

Oct 22 – China announces a series of policy changes: lower mortgage rates, reduced down payments, lower transaction taxes.

Since mid-September — China cuts preferential housing mortgage rate five times, in line with interest rates cuts aimed at boosting the economy.

H2 – Many local governments, including Beijing, Shanghai, Nanjing and Hangzhou, announce measures to support property markets, such as cash subsidies.

FIRST ROUND OF PROPERTY COOLING MEASURES

(2007 — 2008 H1)

June 7, 2008 – For the fifth time in 2008, the central bank raises the amount lenders must hold in reserve by a full percentage point, an indication of official alarm over the huge amount of cash flooding into the economy.

Jan 16, 2008 – China raises the proportion of deposits banks must hold in reserve for the 11th time since the start of 2007 to keep a flood of liquidity from entering the economy.

Jan 7, 2008 – China says land acquired from local governments that goes undeveloped for more than one year will be subject to an “idle land charge” of 20 percent of the purchase price.

Dec 11, 2007 – The central bank orders banks to scrutinize mortgage borrowers more closely.

Sept 28, 2007 – The central bank and the China Banking Regulatory Commission say they will ban banks from lending to developers found to be hoarding land. Required down payments for second homes are raised to 40 percent from 30 percent, and requirements for commercial properties increased to 50 percent from 40 percent.

Aug 7, 2007 – China bans foreign investors in Chinese real estate from borrowing offshore.

June 11, 2007 – The Commerce Ministry issues new rules making it harder for foreigners to invest in property, partly by making them obtain land-use rights before developing projects.

March 23, 2007 – The Construction Ministry says it will check whether local governments are implementing measures aimed at cooling the market and errant officials will be held accountable.

January 2007 – The government says it will increase taxes to discourage sales of large homes and will start taxing the appreciation of property values based on actual market prices.

(Reporting by Langi Chiang and Lee Chyen Yee; Editing by Mathew Veedon)

(See www.reutersrealestate.com for Reuters’ global service for real estate professionals)

Timeline: Important changes in China’s property policy