Chinese urban residents' willingness to buy private homes has dropped to an all-time low, probably because they are waiting to see what the government's next move will be in the housing sector.

 

This week the People's Bank of China, the central bank, said it surveyed 20,000 savers in 50 major cities last month and found that only 18.2 percent of residents have plans to buy private homes within the next three months.

 

This means the number of residents planning to buy homes has dropped 1 percentage point from the previous quarter and 3.8 percentage points from the same period a year ago, a record low.

 

The decline in Beijing, Tianjin and Shanghai was the most obvious, the central bank said.

 

Qi Jingmei, a senior economist with the State Information Centre, said urban residents' wait-and-see attitude was mainly because they are wondering whether the government will carry out further measures to regulate the housing market.

 

"They are hoping the government will reform its present land leasing system, which now requires home buyers to pay land leasing fees included in housing prices," she said.

 

A new system is expected to be adopted by the housing market, which allows home buyers to pay land leasing fees over a 50 - 70 year period.

 

This will help alleviate financial pressure.

 

"People are also hoping that the government will build more homes that are affordable," said Qi.

 

However, she believed the housing market would pick up this year.

 

"People will eventually realize that the country's macro-control measures are not aimed at hitting the real estate market," she said.

 

House prices will continue to rise although the growth rate will decline, she said.

 

Gu Yunchang, secretary-general of the China Real Estate Association, said the government's macro-control measures have already achieved their goal.

 

"Supply is not that much, new houses that are still empty are fewer, and prices have become stable," he said.

 

Figures from the National Bureau of Statistics indicate that average housing prices rose 8.8 percent year-on-year during the first three quarters of last year compared with 10.1 percent in the first half.

 

Growth in real estate investment also dropped to 22.2 percent in the first three quarters, from 23.5 percent in the first half.

 

With an aim to curb speculation and gain control over the red-hot housing sector, the government last year set out measures including the introduction of taxation policies and the implementation of stricter control over land supplies.

 

It began levying a 5 percent business tax last June on the full amount received from selling a home if that home was sold within two years of being purchased.

 

The central bank also ended a preferential policy for mortgages, raising the interest rate on such loans with terms of more than five years by 20 basis points to 5.51 percent.

 

Due to the measures, the real estate bubble has basically been 'squeezed', Gu said.

 

China's housing industry will continue to play an important role in economic development, he added.

 

(China Daily March 17, 2006)