Real estate is an important support of the citizen economy in any country, and grows along at the same pace as GDP and per capita citizen income growth, however real estate is never a 'good kid', while it pulls along the economy and stimulates consumption, it also produces bubbles and disarranges the economy.

China's real estate developing rapidly

Since 1998 when China's real estate market started up, the average rate of growth for quantities of real estate investment and sales have been above 20%, and the real estate's direct and indirect pull effect on the economy has already reached over 2 percentage points. However, this development has taken place under the situation of the real estate market being extremely unregulated.

These past few years, the rate of price inflation among real estate has people staring blankly and tongue tied. Many cities have seen prices double, and a small number of projects have seen prices inflate 7 to 8 times their original price. This year on April 15, the National Development Reform Committee and the National Statistics Bureau issued this year's first quarter National Large and Medium Cities Housing Sales Price Investigation, results show that in the first quarter of 2005, the real estate market prices continued to rise for 35 large and medium cities, and housing sales prices rose 9.8%, among this, new housing residences saw prices rise 10.5%. Land exchange prices rose 7.8%, among which land for residential use rose 9.6%, also nearly a one tenth rise.

Among this, Shanghai's scope of price inflation in housing prices was the highest, reaching 19.1%, nearly a two tenth rise. Another 7 cities respectively were Hangzhou with a 13.8% rise, Chengdu with a 12.5% rise, Xiamen with a 12.4% rise, Qingdao with an 11.7% rise Ningbo with a 11.6% rise, and Wuhan with a 11.2% rise. Compared with the first quarter of last year, besides Changsha which saw a drop in housing sales prices, all other cities saw different scopes of inflation. Among this, Beijing's housing prices saw an increase of 6.5%. If housing prices are rising at a too rapid pace and if controlling measures are not strong, it will result in great increases and great decreases for local real estate markets, and influence the stable functioning of the economy and development of society.

The Notification Concerning Feasible Stable Housing Prices, or the Nation's eight articles, is a concrete measure to control the excessively fast inflation of housing prices, and includes policies concerning in land supply, housing supply framework, demolition and compulsory moving, consuming points of views, market supervision, inspection, and other aspects; although it concerns many problems, it concentrates on the main points, its targets are all the same¨Cthat is to stabilize housing prices. Continuing on from the central bank's new policy on housing loans, after the State's 'Eight Iron Articles' housing stabilization measures where publicly announced, the government again came out with new adjustment policies, on May 12, the Office of State in recent days transmitted to the Bureau of Construction and 6 other Bureau's Opinions Concerning Doing a Good Job in Stabilizing Housing Prices, the macro economic adjustments measures that the government carried out towards the real estate market became further detailed.

The Opinions are divided into five parts, respectively they are: "strengthen planned adjustments, improve the supply structure of housing," "Expand the strength of land supply adjustments, strictly manage land," "Adjust tax policies for housing transferring turn around operations, strictly seek out revenue and taxes due," "Strengthen the credit loan management for real estate, keep away from financial risk," "Clearly allow regular housing standards to enjoy preferential policies, reasonably bring in housing construction and consuming," "Strengthen construction of economically suitable housing, perfect inexpensive rent housing systems," "Feasibly straighten up and standardize market order, strictly investigate and handle illegal and non regulation sales behavior," and "Strengthen market supervision, perfect market information revealing systems."

The Province's eight articles clear a path

Soon after the Nation's Eight Articles came out, Jiangsu Province followed closely after it by issuing the Province's Eight Articles, and further stabilizing real estate prices. The newly issued Province's Eight Articles mainly include each city perfecting its housing guarantee system, among this¡®economically suitable housing' must account for 10% of the area of newly begun construction; among regular new housing, the proportion of small and medium sized housing should reach around 60%; land that has not begun to be built upon for two years will have its right of use rights taken back without any compensation; preferential policies will be given to purchasing common housing; investing in housing speculation will be curbed and stopped, new housing that is purchased and then changes hands within two years are subject to full sales tax; the supervision and management system of the real estate market will be perfected; real estate market research analysis and warning systems will be established; doing a good job in the organization and harmonizing of adjustment of the real estate market will be a priority, and so on. As to the preferential policy of canceling contract taxes of high end housing and the question of what is considered high end housing which is of relatively great concern among housing purchasers, relevant regulations of the Province's Eight Articles and those of the Nation are identical.

Li Jianjun, and authority of Nanjing's Jueze Real Estate Research Center, believes that this time the measures that the province has come out with still are opinions meant for guidance, and concrete implementation must still look at each location. "The concrete situations in every place in Southern Jiangsu and Northern Jiangsu are not the same, and the standards for high end housing that each area is carrying out must very likely be relaxed!" Institute Head Professor Wu Qun of Nanjing's Agricultural University's Non Liquid Assets Research Institute also expressed a similar view.

Nanjing's City's Eight Articles strikes at Nanjing's housing prices

On June 1, on the basis of the Nation's Eight Articles and the Province's Eight Articles, Nanjing's City's Eight Articles were born. The new real estate policies that Nanjing has come out with shows that the government has confidence in the health of the local housing market, and has taken up the attitude of support as to continuing healthy and stable development of the real estate industry. The signal that has come out of the new real estate policies is that the substance of the new polices is a adjustment to the supply structure of the product, leading the direction of developers building residential products, thereby achieving the target of adjusting the supply and demand relationship. At the same time, the new policies will clearly attack investment and speculation behavior, this is in accordance with market economic order.

The City's Eight Articles have been endowed with Nanjing's own characteristics on the basis of the Nation's Eight Articles and the Province's Eight Articles. The Nation's regulation for housing purchase contract tax is: city residents buying "regular residences" can enjoy a preferential policy of only a 2% contract tax; villas and other high end residences can not enjoy this preference, however, and must pay a 4% contract tax. The standard for "regular residences" in the Nation's Eight Articles is "Number of buildings in a residential community being 1.0 or greater; single apartment building area of 120 meters or less; the actual sale price lower than that of other same level housing on other land's average sales price by 1.2 times." These three conditions, in Nanjing the city have designated "regular residences" as "apartment building area's largest standard being 144 square meters."

In the aspect of taxes for reselling old housing, the City's Eight Articles uses the national policies, that is to say beginning June 1st, as to persons who resell housing that they have purchased less than two years ago, during the time of sale sales tax will be collected on the sum of the income gotten by selling the housing; for persons who are selling housing after owning it for 2 years or more, during the time of sale they will be exempt from the sales tax; as to persons purchasing non regular housing that they then resell after 2 years or more, during the time of sale sales tax will be taken on the positive difference between the sales price minus the original purchase price.

Other regulations are also to further stabilize Nanjing's housing prices, and allow Nanjing's housing market to see healthy and stable development.

Outlook for Nanjing's real estate

Ge Yang, Secretary of Nanjing University's Real Estate Research Center, said: "These new real estate policies have just barely gone into effect, and the trend that Nanjing's housing market is heading for must await further investigation. Recently there has been some news about a fall in housing prices that I believe is one sided, and the trend of some people analyzing falls in housing prices according to partial sales volumes of some districts is extremely one sided. If housing prices fall or rise or not should be analyzed from a long term over-reaching viewpoint. In June the housing market just barely entered into new territory, and for the common person there is a process of adjusting to this. When the implementation of these new policies is accepted, the housing market will enter a new stable period.