BEIJING: China’s top advisory body called on the government to relax property market restrictions to keep the economy growing, a newspaper said today, the first such proposal by advisers to steady a weakening house market.
The China Daily cited the Chinese People Political Consultative Conference (CPPCC), an advisory body for Parliament, as saying Beijing should loosen purchase restrictions for luxury homes in the first-tier cities of Beijing, Shanghai, Guangzhou and Shenzhen.
“Restrictions on purchases should be relaxed for high-end residential properties in first-tier cities,” the newspaper cited the proposal as saying. The paper did not say how it obtain the proposal, except to say it was released yesterday.
This is the first time a group of influential economic advisers have called on China to relax controls on the property market, a once-red hot sector that has cooled under a government campaign to make home prices more affordable.
It follows rampant market talk that China could soften its grip on the house market by allowing bigger discounts on mortgage rates, which the government has vehemently denied, saying instead it needs to persevere with price controls.
Premier Wen Jiabao has been adamant that the government will not relax its grip on the housing market even as he has called for other measures to support economic growth.
Analysts say China is unlikely to heed the suggestion as home prices are still too high, but the proposal underlines worries that the Chinese economy could sink into a deeper downturn if the property market is suppressed for too long.
“I don’t think the proposal on relaxing restrictions on home purchases will be accepted by the central government since it is in contrast to Beijing’s tightening stance,” said Li Wei, economist from Standard Charted Bank in Shanghai.
Growth in the world’s second-biggest economy slumped to a three-year low of 8.1% in the first quarter as Europe’s debt crisis sapped export growth. Analysts forecast growth to slacken further to 7.9% between April and June.
The CPPCC, which includes retired or soon-to-be retired officials, meets in parallel to China’s Parliament and has no decision-making powers. But it has in the past floated ideas that subsequently became law.
To bolster demand, the CPPCC also suggested that Beijing relies on cutting interest rates rather than reducing banks’ reserve requirement ratios, the newspaper said.
“In terms of monetary policy, the easing should be moderate, with close attention paid to liquidity, money supply and the amount of credit in the market to avoid major fluctuations,” the proposal said.
Tax rates for small and micro-sized firms should also be lowered to reduce their cost burdens, the CPPCC was quoted as saying.
‘Difficult to relax’
China’s government has leaned against the country’s frothy house market for over two years in the hope of taming record prices, and quelling discontent among millions of property buyers who can not afford to purchase a home.
The campaign has dragged on the economy. The property market accounted for 13% of gross domestic product in 2011.
Beijing’s property curbs included purchase restrictions that bar buyers from buying more than two properties. Mortgage rates were raised 1.1 times, although the central bank cut its policy interest rates this month for the first time since the depths of the 2008 financial crisis.
Data showed Chinese house prices fell for the eighth straight month in May, but the pace of the drop eased, fanning speculation that the market may be hitting a bottom and could rebound.
Figures from the National Bureau of Statistics showed prices fell in 40 cities in May, compared with 43 in April and 46 in March.
Given Premier Wen’s public promises that Beijing would not relent on its campaign to cool house prices, analysts say the CPPCC’s suggestion is likely to remain just that.
“It is difficult for the government to relax control on the property market as that may cause home prices to soar again,” said Nie Wen, an analyst from Huabao Trust.
Nie said relaxing controls on luxury home transactions would also blunt the edge of Beijing’s property policy, which has been aimed at dampening speculation and investment demand for high-end homes.
“Once China relaxes property curbs, it would cause inflation to spike again and there would be no end to troubles caused in the medium- and long-term,” said Nie.