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Shanghai sets target for home-price rise

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A worker at a construction site of an affordable-housing project in Shanghai's Putuo district. The city intends to keep the rate of price increases in newly built homes lower than the city's GDP growth rate and per capita annual household income.[China Daily]

The Shanghai municipal government announced on Monday evening its target for controlling the growth rate of city housing prices this year, becoming the first among first-tier cities to make that commitment. Experts said the goal is attainable.

The city intends to keep the rate of price increases in newly built homes in 2011 lower than the growth rate of the city's gross domestic product (GDP) and per capita annual income of urban and rural households. Meanwhile, the total area of completed government-subsidized properties should exceed that of commercial properties, a notice on the city's website said.

The notice comes amid calls from the central government to cool overheated property markets across the nation. The State Council launched a series of tightening measures on Jan 26 to contain housing-price increases, including raising the down payment for second-home buyers to 60 percent of the full price, from 50 percent, and requiring all local authorities to set their annual home-price-control targets by the end of March.

However, as of late Monday, only 69 of the more than 600 cities across the nation had announced their plans, according to Oriental Morning Post report.

In January, Shanghai forecast its GDP will expand by 8 percent in 2011 and its per capita annual income of urban and rural households will maintain a similar pace.

"The goal is reasonable, and it shows the local government's determination to rein in soaring home prices," said Ding Zuyu, co-president of the China Real Estate Information Corporation. Because of the restrictions imposed on families buying more than one property, the limited high-end property transactions will not drive the average home price higher, and that guarantees the goal will be realized, Ding added.

"The local government will reach the goal by all means," said Chen Sheng, deputy director of the China Index Academy in Shanghai. "The increased supply of land and government-subsidized homes will greatly ease the high demand and keep housing prices from rising too quickly," Chen said.

The latest data available from the Shanghai Municipal Statistics Bureau show the average price for newly built residential property in the city was 14,213 yuan ($7,622) for each square meter (sq m) in 2010, so the goal is to keep the average home price no higher than 15,350 yuan for each sq m, an increase of 8 percent.

Chen said home prices in Shanghai will be unchanged for the next six months, "only a few commercial residential property projects will lower prices to attract homebuyers".

Lu Qilin, research director at Shanghai Deovolente Realty, said budget homes will lower the average home price across the city, making the goal easier to reach. "In that case, I am afraid the increase rate of commercial property home price could rise even more than 10 percent, as long as there is a sufficient supply of government-subsidized homes," Lu said.

Chen said the Shanghai target is one of the lowest rates of increase among all the cities that have published their targets. "In recent months, almost everything's price has increased. An 8 percent increase is not that much, taking rising consumer price index into consideration," Chen said.

China aims to keep its consumer price rise at around 4 percent this year.