10/08/2010, 00.00
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Shanghai adopts new measures against real estate speculation

Households are banned from purchasing third homes. Banks will be limited in the number of mortgages they can issue; taxes will be raised as well. Experts say such steps can only have short-term effects; affordable housing is needed for low-income families.

Shanghai (AsiaNews/Agencies) – The Shanghai government has issued new rules to limit homebuyers to one new flat in accordance with new directives from Beijing designed to rein in property speculation and soaring home prices.

Under the new rules, each Shanghai household will be allowed to buy only one home; additional residential properties will be off limits. Moreover, Shanghai authorities said they would limit the amount of mortgages banks can issue on residences and that they are planning a real estate tax.

In line with national policy, the Shanghai government said it had ordered banks to suspend loans for third-home buyers and would further regulate developers' business operations and strengthen the management of market transactions.

With the new measures, developers are required to pre-pay up to 5 per cent of the transaction price as a land appreciation tax, if the average selling prices of the homes they sell is double from a year ago. The pre-paid tax is currently at 2 per cent.

Chinese authorities are concerned about the real estate boom, which has been fuelled by urbanisation and easy financing. There is great concern that it might turn into a bubble and burst, destroying the savings of millions of families. For this reason, central authorities have issued measures to check prices in Shanghai.

Many experts doubt they will be able to have anything but short-term effects. Instead, they suggest that the government should build affordable housing for low-income families and change financing rules. Nevertheless, some analysts note that similar home purchase restrictions have been taken in Beijing and Shenzhen with limited results. In these cities, demand for real estate has remained strong.

Shanghai will provide 1,100 hectares of sites this year—70 percent of which will be earmarked for affordable houses and small to medium-sized flats. For municipal officials demand is not expected to drop and a total of one million affordable houses will be built over the next five years.

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