Breaking news — Chinese property prices just got a little more inflated.
From Bloomberg (emphasis ours):
China’s property prices rose at the fastest pace in almost two years in February, adding urgency to the government’s efforts to rein in speculation and increase the amount of affordable housing. Residential and commercial real-estate prices in 70 cities climbed 10.7 percent from a year earlier, the statistics bureau said on its Web site today. That topped a gain of 9.5 percent in January.
As we noted two days ago, it looks like current soaring prices property market are here to stay.
Which leaves us wondering exactly where Wen Jiabao promise to deal with “latent risks” in the banking system and put an end to rampant speculation in the real estate market is at.
To be sure, Beijing has been been trying to cool things down. The government has issued a number of circulars, according to London-based North Square Blue Oak. And three new rules look to be a step in the right direction.
First, a new nation-wide regulation on credit guarantee has been issued by the People’s Bank of China and the China Banking Regulatory Commission. Previously fragmented and under various different local jurisdictions, this is a move to end serious competition, low entry barriers and growing credit risk, according to the note.
Second, and perhaps more importantly tighter regulation on property trust financing. Companies will have to be certified before they can borrow from any trust company, while trust companies have been banned from lending to any old Zhang who hopes to buy land. We are told that regulators have already tightened regulations on bank lending to property companies, and as a result, said companies have gone to trust companies for funding. So, this is a good thing.
Finally, the Ministry of Land and Resource says its working on tightening land management and dealing with large areas of unused land. But on this, the NSBO folks are sceptical:
Given that by the end of 2009 there was still about 10,000 hectares of land still unused, it will become difficult for MLR to realize effective land control while increasing the supply of land for residential and social housing construction and promoting urbanization. MLR has urged local governments to sort out unused land as ministry surveys suggest they are responsible for 54% of unused land. As a result, coordination with local governments must be increased and will require more coordination with industrial, fiscal and monetary
policies to use land as a macro control tool.
All in all, perhaps we should give Beijing some credit.
But it does leave us with one nagging question: couldn’t a new government cleanup leave a trail of bad debt as cash for old projects suddenly run dry?
Related links:
Chinese bubbles, ghost towns edition – FT Alphaville
Wen, will property cool? – FT Alphaville
Is China ‘the mother of all bubbles’? – FT
Roach: Pooh-pooh to Chinese bubbles – FT Alphaville