China tightens control on residential housing price

China is tightening its commercial land policies to help control soaring housing prices in some big cities, the Shanghai Securities News reported Friday.

The Ministry of Finance and Ministry of Land and Resources announced on Thursday, that the developers must pay land transfer fees within one year of the transfer, startin with a 50 percent down payment at the time of the transaction.

In some limited cases, the payment period may be extended to two years. If the developer can not or will not pay within the required time, they will not be allowed to invest in new projects.

"There were no unified regulations on land down payments in different cities before, most of which were between 20 percent and 30 percent," said Zou Xiaoyun, deputy chief engineer of China's Land Survey and Plan Institution.

The increasing housing prices may actually be self-sustaining: developers buy land, expecting it to appreciate, causing an increase in demand, which then causes the land values to increase. The regulations may counteract that trend, however, said Chen Shen, vice director of the China Index Research Insituttion.

"The regulation will make the developers sell more of their apartment to get the money. As a result, there will be more residential apartments available on the market," Chen said..

That effect may still be fairly limited, however, said one developer.

"It may affect smaller size real estate companies, with a limited effect on big ones, but the government may have following up policies on this," the developer said.