The more affordable housing built, the more likely to get China's skyrocketing housing price under control, and more people will have a chance to make their dreams of owning a housing unit come true, especially for those living in big cities.
Government planning
China plans to begin construction or renovation on at least 7 million housing units for low-income groups next year, Minister of Housing and Urban-Rural Development Jiang Weixin said last Friday.
The target covers both newly-built subsidized housing units and houses in run-down areas that will undergo renovation, said Jiang.
Residents' reasonable demand for house buying will be supported and priority will be given to meeting the first-time buyers' need for loans, Jiang noted, while reiterating that regulation on the property sector will continue.
Financial challenges
Vice Premier Li Keqiang described next year's task of building affordable housing as arduous and called for stronger support for the projects in a national meeting Thursday.
The number of low-income housing units the government aims to start building next year will be lower than that of this year (10 million units), but the scale of construction will remain large because of the continuation of this year's projects, Li added.
The target is down because a slower pace can better ensure construction quality and funding, said Vice Minister of Housing and Urban-Rural Development Qi Ji.
But how to finance such large-scale construction of social housing is a major challenge, experts pointed out.
"Such a problem is pressing since most local governments will see revenues shrink due to a drop in land sales amid the property market correction," said Qin Xiaomei, chief researcher at Jones Lang LaSalle (Beijing), an international provider of real estate services.
Industry statistics show that average land prices have fallen 20 to 30 percent this year as most developers have had to deal with a squeezed cash flow.
The central government subsidies for the housing projects will markedly increase, while more private funds will be raised through bank loans and corporate bonds, Vice Premier Li Keqiang said.
Besides central government fiscal supports, most local governments are trying to get money from the capital market.
According to Sun Gongsheng, head of the Nanjing branch of the People's Bank of China, there have been more than 30 debt financing projects in Jiangsu province, which are expected to raise more than 10 billion yuan (about 1.58 billion US dollars) to finance the construction of social housing.
And other institutional investors, including international ones, also have showed interest in investment in social housing construction. Ling Xinyuan, chairman of UBS Global Asset Management (China), said that their real estate fund is seeking opportunities to invest in government-subsidized housing.
Significance
China's new target of building or renovating 7 million housing units for low-income groups next year will help keep the property market cool, experts commented.
The construction and completion targets for these units have been distributed to municipalities, provinces and autonomous regions across the country.
"We expect the private housing market to weaken as the government continues its tightening policy, but we do not expect a collapse," said Wang Tao, head of China economic research at UBS Securities.
Wang said social housing will support overall construction in the next 12 to 15 months in terms of fixed asset investment, thus help avoid a hard landing in China's economy.
China's once red-hot property sector has shown signs of cooling off this year with the help of tough government measures.
Since April 2010, China has imposed a raft of measures aiming to calm property prices. These measures include higher down payments, home ownership limits, the introduction of a property tax in some cities and the construction of 36 million subsidized housing units by 2015.
Tightening measures have begun to bite. November saw 49 out of 70 monitored cities report falling prices for newly built residential properties from a month earlier, while prices in another 16 cities remained unchanged, according to figures released by the National Bureau of Statistics earlier in December.
China will unswervingly maintain its regulation policies on the property market next year intended to return housing prices to a reasonable level, according decisions made at the country's central economic work conference earlier this month.