ALMOST one year after the central government introduced the "70 percent, 90 square meters" policy, a quarterly report released by the National Development and Reform Commission indicated it might take much longer for the initiative to be fully implemented.
In the first three months, nationwide investment in residential units with a gross floor area, or GFA, of less than 90 square meters only accounted for 16.1 percent of the total, the Shanghai Securities News reported last week, citing a first-quarter real estate market report conducted by the NDRC.
In May 2006, the Ministry of Construction announced the combined GFA of all residential units below 90 square meters should account for 70 percent of a project's total. The policy applied to residential developments approved to break ground after June 1, 2006.
The policy was designed to raise the supply of small and medium-size homes and discourage luxury houses from being built. However, it stirred immediate controversy and discussions among industry people and analysts. Many found the policy arbitrary and too general to be enforced nationwide.
Nie Meisheng, director of the real estate sector of the Federation of Industry and Commerce, said earlier it's inappropriate to set a fixed percentage to reflect market demand. Nie is also a former senior official with the construction ministry.
"If the demand exceeds 70 percent, then the price will continue to rise due to insufficient supply. If the demand is less than 70 percent, a surplus of vacant property will be created," she said. She thinks the 70 percent figure is too high.
Yin Kunhua, a former professor at Shanghai University of Finance and Economics, said the 90-square-meter standard might be appropriate for second- and third-tier cities, but could be too small for Shanghai and Beijing.
However, while the debate whether the policy is appropriate remains, its influence on real estate markets nationwide is rather different.
Beijing appeared the hardest hit by the 70 percent, 90 square meters policy as its government has demonstrated little flexibility in implementing the policy, according to research by an independent industry consultancy.
Knight Frank, a London-based property consultancy, said in a report on April 23 that Beijing's residential demand is skewed toward large units with sizes well above 90 square meters.
Last June, prior to the policy taking effect in Beijing, residential units of more than 90 square meters accounted for 68 percent of the city's total residential transactions, Knight Frank said.
There also have been reports that more than 600 projects that should have commenced work in the second half of last year were delayed as the policy has caused confusion among developers. The reports said developers may have anticipated a loosening of the policy, and thus didn't modify development plans to comply with the new rule until early this year.
Coupled with other policies including stricter capital requirements for developers, the policy has contributed to a year-on-year, 40 percent decline in the total GFA of residential projects under construction in the second half of 2006. It in turn fueled expectations of insufficient supply of large residential units in the future, underpinning a recent surge in residential prices, Knight Frank said.
Elsewhere in the country, the policy's impact has varied. "Local governments have different interpretations of the policy due to its ambiguities while demand for small residential units varies greatly in different regions," said Xavier Wong, director and head of research of Knight Frank Beijing. Shenzhen, according to the research, has been the least affected city as demand there is broadly in line with the policy.
In 2005, small units below 80 square meters accounted for 51.9 percent of residential supply. Thus, the policy could be easily implemented without developers needing to significantly modify project plans.
Meanwhile, municipal governments in Guangzhou and Shanghai have both loosened the policy, Knight Frank's report said.
In Guangzhou, the policy applied to the total development in a particular area rather than a single project. It was also reported that if a developer submits multiple development plans for approval at the same time, the policy will be applied to all projects. Shanghai has a similar approach.
Source:佚名