China's most developed city, Shanghai, has announced a contentious rule, controlling the real estate growth that in fact it blames for deterring foreign investment.
According to SCMP, government official announced that they are stern about controlling property price growth even though national austerity measures, in theory, will be lessened to spur the industry that is currently experiencing economic slowdown.
Shanghai Communist Party boss Han Zheng said while attending a conference, "We must be fully aware of the task of controlling the property market and stand firm against a property bubble. We can't blindly follow others' steps in making real estate policies."
He added, "If we fail to control the property market, the whole city's competitiveness will be dented."
Shanghai has regarded real estate as its back bone for a long period of time and Han's comments only ignited concerns that the city might not recovery easily with the new policy.
Officials that the Shanghai's high property prices are impeding the city's rise as an international metropolis in a sense that expensive flats, a HK$6.1 million two-bedroom in the city center for example, are discouraging workers from living there. On the other hand, increase in home prices are beneficial to home owners in a sense that it increases personal net worth.
Developers and analysts believe Shanghai's administration will intervene to reduce cost of home prices for the benefit of homebuyers while it will impose higher taxes to owners selling property to control transaction volumes. As a result, Shanghai will see fewer high-cost homes as developers are discouraged to build them.
On the other hand, analysts also doubt that any policies that would cap the increasing price of property in Shanghai would succeed. Apparently, Hong Kong has remained as the world's most expensive city for homes, although the government has been trying to control prices in the same manner Shanghai's administration is trying to do.
