Record-High Land Prices in Beijing Mock Efforts to Rein Them In
[xtypo_dropcap]T[/xtypo_dropcap]hough Beijing is trying to control the real estate market, record-high land prices are prevailing. This was exemplified in a recent directive from the Ministry of Land and Resources that was openly ignored just two days after it was issued.
The Ministry issued a notice on Dec. 19 stipulating that any record-breaking land sale, along with the “land kings” involved, be reported within two days of the transaction. On Dec. 21, the CITIC Group won a bid on state-owned land in Beijing’s central business district (CBD), with a tidy price tag of 6.3 billion yuan (close to US$1 billion). This deal broke the all-time sales price for a single piece of land in Beijing.
Experts say that such notices are simply unable to change the dependence of local governments on land sales for revenue, and cannot solve the fundamental problem in China’s real estate market.
This is further illustrated by a series of spectacular sales over the last month.
On Dec. 9, Yemao Investment Company bought land in Shanghai for US$2.5 billion, or an average of US$305 per sq. ft., breaking the record in Shanghai’s suburbs. On Dec. 16 at a major land auction in Guangzhou, two companies bought three pieces of residential land and broke the record for Guangzhou twice. The record was set at US$ 288 per sq. ft. A piece of land in Hangzhou city, Zhejiang Province, sold for US$ 360 per sq. ft. on Nov. 25, breaking previous local records. But on Nov. 29, Wenzhou University in Wenzhou City, Zhejiang, sold its land for US$ 517 per sq. ft., a 43 percent increase in four days.
The authorities have put out policies trying to curb real estate prices, including increasing the down payment, increasing the interest rate on mortgage loans, and limiting loans for the purchase of a third house, but none have worked.
Ji Zhuoyao, a commentator at Huasheng Online, wrote: “There are two major reasons for land prices to continue to escalate. One is the overly high expectation of profit margins in the real estate and housing market. The other is that many local governments have deemed land as their main source of financial income and they depend on collecting money from land sales and land taxes.”
In the face of these imperatives, a notice from that Ministry means little, he says. Since land kings are created through legal and transparent means, the Ministry can’t do much about it.
Professor Frank Xie at the University of South Carolina, Aiken, told The Epoch Times that the continued emergence of new land kings around China indicates that Beijing’s measures to control land prices have failed.
It also indicates, he said, that local governments, banks, land developers and state real estate companies remain unbridled in their pursuit of profits in the rising real estate market—not a cash cow they are likely to sacrifice any time soon.
Xie pointed out that control measures announced by the central government become less effective or even useless when they reach lower levels, which is a direct result of the Chinese regime’s monopoly on power, where local Party cliques enjoy unchecked power over their local economic fiefdoms.
Xie believes that to fundamentally solve the problems in China’s real estate market, the regime needs to return property rights and land ownership to the people. It needs to revoke the monopoly of state-run real estate companies and sever the conspiratorial ties between banks and land developers.
But, he said, endangering the financial imperatives of local governments has long been a no-go zone, since any serious attempt to do so would immediately destabilize central Party authorities and their ability to rule the country.
Read the original Chinese article.