Local govt targeted in latest move to curb rising home costs

The central government will crack down on the hoarding of undeveloped land in an effort to tackle rising property costs, officials from the Ministry of Land and Resources said.

Zhu Liuhua, the ministry's director of farmland protection, said local governments would be penalized if land is left idle two years after it was approved for use by the central government.

Under the current regulation, local officials must apply annually to the central government for land allocation and show how they plan to use plots.

If approved, local government officials distribute the land for different uses, including housing, commercial and industrial. The land must be used within two years.

"Curbing land banking or the speculative hoarding of government-released land is the top priority of our work schedule this year," Zhu said.

"In order to curb land hoarding by local governments, we will determine how they used land allocated before 2007 and will take this into consideration when assessing new land release applications."

Ministry data shows about 10,000 hectares of land approved for real estate development is idle across China. The practice is blamed for increasing housing costs as it lowers the amount of available land.

Dong Zuoji, the ministry's director of land, said that under the new measure, if 1,000 hectares of land approved for development before 2007 is still idle, then that government will lose 1,000 hectares from this year's land allocation.

The penalty system is the latest in a series of measures that the central government has taken to stop land hoarding by governments and developers.

A China Index Academy real estate report released on Dec 31 showed the land transfer fees last year for 60 major cities doubled year-on-year and the average price for residential land had reached 2,035 yuan ($300) per sq m, a year-on-year increase of 36 percent.

On Dec 23, the ministry released 18 idle land plots held by developers across nine provinces and municipalities.

Several days earlier, the Ministry of Finance and the Ministry of Land and Resources announced that developers must pay land transfer fees within one year of the sale, starting with a 50 percent down payment at the time of the transaction.

Yao Honglai, a professor at the real estate research center of the Shanghai Academy of Social Science, said the crackdown should have a positive impact on the price of housing.

"The new measure can avoid the land hoarding at the government level and help control housing prices," Yao said.

(China Daily 01/07/2010 page4)