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Experts predict the upcoming annual sessions of China's top legislative and advisory bodies will further enhance the country’s goal of developing a long-term mechanism to end speculation in the housing market.
In the lead-up to the two sessions, the consistent message of housing policies released at provincial-level meetings of legislative and advisory bodies is that housing should be for living in, not speculation.
Experts told the People’s Daily on Monday to expect strict curbs on the real estate market during March’s two sessions.
Yan Yuejin, a research director at the Shanghai-based E-house China R&D Institute, predicted 2018 will see tighter financial markets, with more regulations on fund raising. For the real estate market, this means financial controls will be more severe, and their influence will be both direct and continuous, Yan said.
A real estate tax is expected to be discussed during the two sessions. This means that plans for the reform of the real estate industry have been clearly defined, Yan said.
Housing policy reform
In October 2017, the 19th Communist Party of China (CPC) National Congress proposed that housing reforms should follow the principle“houses are for living in, not for speculation.”
The overall framework of the reform had been defined as“speeding up the supply from various sources to meet basic demand with different channels, and to put the same importance on both rentals and purchases.”
Housing reform will focus on three aspects: making the rental market as important as the buying market, increasing the amount of housing stock, and meeting basic housing demand using various channels (such a rentals and leasing), Li Wei, the director of the Development Research Center of the State Council, China's cabinet, told the People’s Daily on Friday.
To put the same importance for both rentals and purchases will challenge the market structure. It requires starting from accelerating the development of the leasing market, invigorating the amount of housing stock and promoting a specialized and institutionalized long-term leasing system, Li said.
Supportive policies on financing, tax and land resources allocation need to be developed. In addition, related regulations and laws also need to be provided to protect the legitimate rights and interests of leasing stakeholders when it comes to the equal opportunity to public services, Li said.
Market demand requires clarifying housing policies to improve the ability to meet the basic demands of low-income groups, Li said.
In the context of de-leveraging, there will be no opportunity for housing speculation, Li stressed.
Long-term mechanism
A long-term mechanism sets the goal for the real estate sector to achieve sustained, steady and sound development, Yan said.
It includes long-term mechanisms for supply-side, demand-side and price-side policy.
During a meeting in December 2017, the Political Bureau of the CPC Central Committee aimed to“accelerate the reform of the housing system and build up a long-term mechanism.”Housing reform has everything to do with this long-term mechanism.
In housing reform, the leasing market is a very important component. It is crucial to integrate the rental market into a long-term mechanism.
It takes three building blocks to build up an ideal leasing market: a credit system, equal opportunities to access public services and the securitization of rental capital.
The rental credit scoring system will be built using the concepts of the mobile Internet and big data.
In the future, credit evaluations can be provided for different tenants. Pricing could be determined according to the credit score. The new system would eliminate the risk of information asymmetry and also help reduce transaction costs.
When it comes to equal opportunities to access public services for renters and homeowners, policymakers need to study the new demands of tenants. A point system can be used to determine the eligibility of renters for residential registration, education for children and health care, services currently provided only to owners. Once equality for renters is ensured, demand for the rental market will be unleashed.
In the field of rental capital’s securitization, Yan suggested full consideration to the essential differences between the sales market and the rental market. Yan said policymakers need to actively create a more affluent financial environment for rental market enterprises. If companies could achieve a faster return on funds, their enthusiasm for participation in the rental market could easily be sparked.
These three building blocks will help achieve stability and sustainability for the housing rental market. Yan predicted more innovation in pragmatic policies in both land regulation and financing.
