Smaller cities mull inventory reduction

Lower-tier cities must take city-specific measures to reduce their residential property inventories gradually, as there is no heal-all solution, said analysts.

Jia Kang, a member of the 12th National Committee of the Chinese People’s Political Consultative Conference, fiscal and tax expert at theMinistry of Finance, and a former director of the Chinese Academy of Fiscal Sciences, said that third- and fourth-tier cities must target local buyers who live and work there.

“Quite often, they do not have strong purchasing power, and reducing inventory cannot rely solely on providing mortgage loans. Each city has its specific conditions and problems to tackle, so there is no single model that every city can follow,” said Jia.

In some cities, local authorities are giving a stipend for purchasing a home, or waiving taxes on transactions and lowering down payment requirements for mortgage applicants.

Each city has its specific conditions and problems to tackle, so there is no single model ...” Jia Kang, fiscal and tax expert at the Ministry of Finance

Li Daokui, a member of the 12thCPPCCNational Committee and economics professor at Tsinghua University, said that he is strongly against some short-sighted measures taken in lower-tier cities for reducing inventories, such as requiring zero down payment and encouraging buyers to borrow money for down payments.

“These measures are like taking poisonous drinks when thirsty. These measures could spawn future bubbles,” said Li.

Effective measures may include encouraging rural residents to rent apartments in urban areas, and buy properties later when they can afford them, he said.

For example, local authorities can buy idle properties using a fund, and then lease them to rural residents.

In some lower-tier cities, local governments have encouraged enterprises to refurbish idle projects to make them employee housing projects, or offered residents who moved out from shanty towns stipends or favorable policies to buy new apartments.

In Xianing, a small city in Hubei province, which used to face high inventory pressure, residents said they have more incentives to buy apartments now as they see more job opportunities.

“A warm spring town for tourism is developing fast so there are more job opportunities. For residents of small towns like me, the priority is locating a job, and settle in a place where I can work. If tourism is booming, and a job is secured, I’ll have more confidence to apply for mortgage to buy an apartment,” said Liu Weiguo, 31, an electrician.