Vice-Premier says 'arduous' task of construction will continue

BEIJING - Vice-Premier Li Keqiang described next year's task of building affordable housing as "arduous" and called for stronger support for the projects.

The number of low-income housing units the government aims to start building next year will be lower than that of this year, but the scale of construction will remain large because of the continuation of this year's projects, Li said at a national meeting on Thursday.

Experts added that China's new target of building or renovating 7 million housing units for low-income groups next year will help keep the property market cool.

Minister of Housing and Urban-Rural Development Jiang Weixin said at a meeting on Friday that the new construction target covers both newly-built subsidized housing units and houses in run-down areas that will undergo renovation.

The target is down from this year's 10 million newly constructed affordable housing units, as a slower pace can better ensure construction quality and funding, said Vice-Minister of Housing and Urban-Rural Development Qi Ji.

A clear annual target of how many units should be finished next year has also been set - 5 million - which is higher than the actual finished number this year, according to the ministry.

Both the construction and completion targets have been distributed to municipalities, provinces and autonomous regions across the country.

Central government subsidies for the housing projects will markedly increase, while more private funds will be raised through bank loans and corporate bonds, Vice-Premier Li noted.

Since April 2010, China has imposed a raft of measures aiming to calm property prices. These measures include higher down payments, home ownership limits, the introduction of a property tax in some cities and the construction of 36 million subsidized housing units by 2015.

Tightening measures have begun to bite. November saw 49 out of 70 monitored cities report falling prices for newly built residential properties from a month earlier, while prices in another 16 cities remained unchanged, according to figures released by the National Bureau of Statistics earlier this month.

Minister Jiang said on Friday that regulation of the property sector will continue next year.

"We expect the private housing market to weaken as the government continues its tightening policy, but we do not expect a collapse," said Wang Tao, head of China economic research at UBS Securities.

Wang said social housing will support overall construction in the next 12 to 15 months in terms of fixed asset investment, thus help to avoid a hard landing in China's economy.

But how to finance such large-scale construction of social housing is a major challenge, experts said.

"Such a problem is pressing since most local governments will see revenues shrink due to a drop in land sales amid the property market correction," said Qin Xiaomei, chief researcher at Jones Lang LaSalle (Beijing), an international provider of real estate services.

Industry statistics show that average land prices have fallen 20 to 30 percent this year as most developers have had to deal with a squeezed cash flow.

Besides gaining fiscal support from the central government, most local governments are trying to get money from the capital market.

According to Sun Gongsheng, head of the Nanjing branch of the People's Bank of China, there have been more than 30 debt financing projects in Jiangsu province, which are expected to raise more than 10 billion yuan to finance the construction of social housing.

Some institutional investors, including international ones, also showed interest in investment in social housing construction. Ling Xinyuan, chairman of UBS Global Asset Management (China), previously told China Daily that their real estate fund is seeking opportunities to invest in government-subsidized housing.

China Daily