The Chinese central government is advancing plans to expand urban housing supply and alleviate overheating real estate markets in Beijing and Shanghai via the introduction of joint property rights for residential homes.
On 21 September the Ministry of Housing and Urban-Rural Development issued the “Opinions on the Development of Joint Property Rights Housing Trials in Beijing and Shanghai” (关于支持北京市、上海市开展共有产权住房试点的意见),as part of efforts to increase housing supply and make real estate more affordable for urbanites in two of China’s biggest and most influential cities.
A day previously Beijing released its “Beijing Municipal Joint Property Rights Provisional Administrative Measures” (北京市共有产权住房管理暂行办法), scheduled for implementation on 30 September.
Beijing first mooted the idea of joint property rights for housing in a draft document issued earlier this month, which outlined a scheme under which new homes are jointly owned by both the government and homebuyers, with the government ceding the rights of usage to buyers.
The new opinions provide greater detail on the central government’s intentions with respect to the joint ownership rights housing policy, requiring the “development of joint property rights residential housing, the formulation of detailed administrative measures, the clarification of a supply target scope, the establishment of a healthy regulatory system for joint property rights residential housing allocation and pricing, property rights allocation, usage rights and property transfer.
Beijing has set a target of 250,000 joint ownership rights homes over the next five years, while Shanghai had already established a supply of 89,000 joint-ownership rights welfare homes by the end of 2016 following the launch of its own trials at the start of the decade.
The target recipients of the current policy will be disadvantaged groups who satisfy statutory requirements, with preferential treatment afforded to families that current lack homes of their own.
Gu Yunchang (顾云昌),vice-chair of MOHURD’s residential housing policy expert committee, said that the current round of proposed trials will serve as a major step for supply-side structural adjustments of the residential housing market, with a view to satisfying the housing demand of the lowest income groups in major urban centres.
The Beijing provisional measures, for example, stipulate that any families that currently satisfy purchase restriction conditions and lack residential housing are eligible to apply, and that at least 30% of joint property ownership homes will be used to satisfy the housing needs of migrant worker families.
According to Gu once public rental housing and other forms of welfare housing cover basic the residential housing needs of the lowest income groups in first-tier cities, the next step will be to cater to the housing needs of China’s economically healthy “new urbanites,” comprised middle-income residents and young people who still lack homes of their own.
Analysts believe that in future China’s residential housing supply in first-tier cities and hot-spot urban centres will consist primarily of public rental housing (公租房), rental homes for younger people, joint property rights homes with comparatively poor liquidity, as well as a comparatively small supply of commercial homes.
Liquidity of joint property right homes constrained by perpetual state ownership
Beijing’s new provisional measures place heavy restrictions on the transfer and acquisition of equity stakes in joint property rights homes, prohibiting purchasers from ever acquiring government-held ownership rights.
The imposition means that joint property rights homes cannot be converted into commercial housing, and can only be transferred amongst families who qualify joint property rights housing, greatly reducing its liquidity as well as serving as a bar against speculative investment.
Yan Yuejin of Shanghai E-House Real Estate Research Institute said to 21st Century Business Herald that the fundamental difference between joint property rights homes and standard residential property is that the constrained liquidity of the former translates into reduced purchasing costs.