China faces a significant challenge, as local governments are having difficulty rolling out home price control targets required by the central government, according to local news agency Xinhua.
“Local governments have to make a tough choice between netting revenues from selling land to property developers and curbing home prices, as they were asked to do by the central government,” said Cao Honghui, a senior researcher from the Institute of Finance and Banking under the Chinese Academy of Social Sciences.
Earlier this year, local governments were asked to control home prices in an attempt to curb property prices and prevent a possible property bubble.
With the public expecting a property price decrease, over 100 cities have set their targets as ordered, seeking to connect the targets with disposable income growth and gross domestic product (GDP) growth.
Only Beijing promised to maintain or lower the current home price level.
However, Mr. Cao said that the priority for local governments is to develop adequate affordable housing.
“China should formulate a parallel system in the property market — affordable housing and commercial housing — to meet low-income residents’ demands and the demands of others for improved housing and investment,” he said.
China plans to develop approximately 10 million affordable homes this year, as part of a 36 million low-cost homes programme to be developed over the next five years.
When completed, the programme will account for 20 percent of China’s total housing, according to Prime Minister Wen Jiabao.
Some analysts predict that the central government will continue the strict implementation of purchasing limits and new tax policies in order to control property prices.