Autumn 2011
Summary:1. The Burden of Subsidized Housing
2. Will Housing Projects Boost GDP?



Tranlsated by ZhuNa and Song Chunling

The Burden of Subsidized Housing
Construction started on 10 million subsidized homes in 2011, but who is paying for the projects and how are commercial developers coping?
Cover Story 
Original article: [Chinese]

At first, the government target's of starting construction on 10 million subsidized apartments in 2011 and 36 million during the twelfth five-year plan sounded like another Great Leap Forward.

...When the plans were announced, industry analysts worried that subsidized housing would take potential customers and land away from commercial developers that cater to the low-price market.

... Developers that are focused on the bottom end of the commercial housing market, such as Vanke (万科) and Country Garden (碧桂园), worry that they may suffer from the accelerated construction of subsidized housing. Given the completion timetable, the effects may not be felt until the end of 2011. 

... Critics argue that the government’s attempt to control the real estate industry won’t stabilize house prices, but just fragment the market, causing a sharp increase in the price of commercially-built housing.

... These raise the problem of how Beijing ought to supervise the construction of social housing as well as the more fundamental question about the aims of the social housing policy. Is it for the welfare or for the investment?
[Full English Translation]

Subsidized Housing Projects Around the Country
Original article: [Chinese
By Song Yao (宋尧)
Orginal article: [Chinese]
Beijing has accelerated construction of subsidized homes in 2011, and the city now needs to raise more funds to finance the program. The city started work on 200,000 of the homes in 2011, but, at the same time as it build new homes, it has to service 120 billion yuan in loans secured against land.

Lanzhou (
By Song Yao (宋尧)
Original article: [Chinese]
Funding problems are severe for governments in western cities, such as Lanzhou (兰州), which plans to build 505,000 subsidized home in 2011, mostly by replacing shacks. The city invested 920 million yuan between 2007  and 2010 but needs to raise another billion yuan  “Lanzhou’s annual financial income is less than eight billion yuan. It now plans to sell off more low-rental flats, and will appeal to the provincial and central governments for more funds.

By Song Yao (宋尧)
Original article: [Chinese]
The three provinces in the northwest of China - Dongbei, Heilongjiang, Jilin and Liaoning - have made the most progress with construction of subsidized homes.
Many people in those provinces have hitherto been living in shacks, and the redevelopment of these areas for subsidized housing is the least costly form of subsidized housing, although there is controversy over whether it’s appropriate for the provinces to describe these redevelopments as subsidized homes.
In Harbin, the government also funds the construction with revenue from land sales and commercial housing in the shack areas.

By Wu Qiong
Original article: [Chinese]
Guangzhou’s real estate market shrank sharply in autumn, with sales for September and October down 60% on year-earlier figures. Until then, the city’s real estate sector had performed well since the nationwide sales restrictions are moderated locally and the city benefits from a steady inflow of migrants wanting to buy homes.
With subsidized housing being allocated to the well-educated as well as the poor, many city residents questioned by the EO said they intend to wait and see whether they qualify for the cheaper homes.

By Zhang Xiaohui (张晓晖)
Original article: [Chinese]
Chongqing has this year started construction of 515,000 subsidized homes, beating its 506,200 target, but house prices in the western metropolis fell 1.4% between August and October, according to data from the China Index Academy.
However, that decline isn’t exactly due to the scale of the subsidized construction. Market analysts blame property taxes that are particularly burdensome on those buying second properties whose registered place of residence is elsewhere in the country.
Since March, the government has housed 55,119 families in subsidized homes and the number is expected to reach 80,000 by the end of this year. 

Will Housing Projects Boost GDP? 
As developers shun subsidized housing projects and analysts question 2011's construction statistics, can we really pin growth hopes on the 36 million new homes?
Page 29
Original article: [Chinese]

China’s plan to build 36 million subsidized homes over the next five years could cost 5 trillion yuan, with investment bank CICC forecasting local governments’ contribution at 2.7 trillion yuan.

...The government is hoping that its subsidized housing program will kill two birds with one stone – making housing affordable to those at the bottom of society at the same time as stimulating demand and cushioning any slowdown after decades of breakneck growth.

The hopes of a demand boost aren’t just wishful thinking. In the past, the real estate sector has accounted for a major chunk of China’s growth.

...as sales restrictions take hold, the housing market has now started to soften. During September and October, which are traditionally the peak period, prices declined.

People are now pinning their hopes on a loosening of the sale regulations, while economists weigh up whether subsidized housing can drive China’s growth.

...The government is likely to be disappointed in its hope that private developers will seize every opportunity to build subsidized homes and its allocation of homes has also been heavily criticized. 

...The government plans to reduce the rate of subsidized home construction to 8 million new projects in 2012, and as its focus shifts to the short-term, the market will become more volatile, local governments will become more risk averse, and banks’ balance sheets will suffer. Perhaps, by then, the subsidized housing project will begin to look like a mirage.

[Full English Translation

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