China's new policy to stabilize the real estate market does not aim to cut housing price and the government does not want to see drastic up and down in housing prices, according to a senior official of the Ministry of Construction. What the government wants is the stabilization of housing prices since "the real estate issue is not only an economic issue,but also social and political issues," said Xie Jiajin, vice minister of construction.

Last month seven government departments issued a joint circular in an attempt to stabilize rocketing housing prices.

The new policy puts an end to the practice of selling private houses without paying business tax, and asks the owners who sell their houses less than two years after they bought the property to pay business tax for the whole sales income. It also gives clear requirements on affordable housing and restricting developers' profits.

Since last year, some places witnessed rapid growth of real estate investment and housing price, which stimulated speculative purchase and led to price hike of raw materials. "This has a negative impact on the right of the ordinary people,the healthy development of the national economy and social stabilization," Xie said in an interview with People's Daily, the leading newspaper in China.

The average housing price rose by 14.4 percent in China last year, according to the National Bureau of Statistics. In Shanghai,the average price in urban and suburban areas exceeded 10,000 yuan (1,207.7 US dollars) per square meter in 2004. The price of some residential apartments increased 20 percent in a few months.

The Chinese government had to take precaution measures in the real estate market so as to safeguard healthy economic growth and the people's interest as well as prevent financial risks, Xie said.

But the new policy does not mean housing price slump, which he said "does no good to the ordinary people."

Now most families have got their own property, and the drastic drop in housing price might bring about deficit to their family assets, he said, adding that he saw no possibility of a housing price slump because of the high cost of construction.

The key point is to adjust the unreasonable structure by providing more medium- and low-price apartments, he said. Official figures showed that in China's real estate market, the proportion of affordable housing, built for the needy, had reduced from 6.1 percent in 2003 to 4.6 percent in 2004, indicating slimmer chances for the low-income group to buy houses.

The new policy, on the one hand, increases the cost of speculative activities, such as some rich people buying their second or more houses at preferential prices to sell or rent for profits. On the other, it will not affect the ordinary people to buy houses to live in.

With the new policy in place, Xie said he was "confident" about a stable housing price.

"This macro-regulatory policy uses economic and legal means to restrain speculation, which is a main cause of soaring housing price, so when we check the speculative demand, the tension between supply and demand will ease and the goal of stabilizing housing price will be fulfilled," he said.

Source: Xinhua