By Liu Weimin, DRC

2017-1-5

The regulation and control of real estate market need to be implemented in light of the following aspects. First, regulation on the real estate market is needed to strengthen the living function of houses and check its investment attribute. It should be made clear that houses are built for living, but not for making profits. Otherwise, regulation would go beyond the set principle. Second, regional differentiation is still an important prerequisite to be considered in formulating housing policy. The policies of destocking and control of asset price bubbles need to be implemented adaptable to local conditions. Third, it is necessary to keep vigilance against financial risks of real estate market. Credit support for the basic housing needs is reasonable, but the demand of investment and speculation should be deleveraged to prevent real estate bubbles and hidden dangers for the stable and healthy macroeconomic operation.

We are witnessing more and more houses in stock. In some large and medium-sized cities, housing stock transactions have accounted for half of all transactions, and the second-hand housing transaction volume has risen sharply. There are three reasons for that. First, the total supply and demand tension has been greatly eased. The proportion of housing stock transfer and re-allocation has been continuously improved, which is the inevitable trend of development of supply and demand of the real estate market.Second, the share of land supply for construction is influenced by many factors including the demolition rate and land indicators. In the short term, more families can only meet their housing demand though the housing stock market. Third, the demand of upgraders for housing improvement needs to be released to encourage them to trade in old homes for new ones.

In 2017, the general principle for regulation and control of real estate market will focus on intensifying the residential function of real estate and strictly inhibiting its investment attribute. Tightened regulation will be maintained in cities where housing prices are not in lockstep with the local economic fundamentals. Policies will be relatively flexible for the third- and fourth-tier cities, where the housing stock is still high.

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