This is one of the most harsh administrative measures to cool the property market in the city. The new "Beijing 15 Articles" is basically a Beijing's comprehensive and local version of "New National Eight" originated from the Chinese central government. Since it is typically developed on top of the "New National Eight", we now put the summarized contents of Beijing's 15 Articles into a table format of the original National's 8 Articles, so that readers can compare both of them more easily:
|(1)||Implement responsibilities of Beijing government.|
Article 1: Beijing government assumes responsibilities to ensure stable and healthy development of Beijing property market.
|(2)||Push for housing assurance projects. |
Article 2: Establish and improve the system of affordable housing. Make at least 200K affordable flats available in 2011. By the end of 2015 (this 12th 5-year plan), number of affordable flats should reach 1 million, a double of the previous 11th 5-year plan.
Article 3: Aggressively develop the public rental housing. Make at least 10K public rental flats available in 2011.
|(3)||Reinforce tax collection. |
Article 4: Implement the full sales tax for individuals who resales housing within a 5-year period. Block tax loopholes induced by fake housing contracts.
Article 5: Implememt the pre-paid differential value-added land tax for real estates with price level significantly higher than its cost.
Article 6: Reinforce value-added land tax audit and inspection especially for real estates with price level significantly higher than its surrounding region.
|(4)||Implement the differential housing credit control policy. |
Article 7: For all second-home buyers, implement 60% of the home value as the minimum down payment, and the interest rate of the bank loan should also be at least 1.1 times the benchmark rate.
|(5)||Strictly manage supply of housing land. |
Article 8: Increase supply of housing land effectively. Make sure at least 50% of overall land supply should be used for building affordable housing, and 70% of overall land supply should be used for building medium-to-small sized flats. Implement "price restriction" to cover auctions of lands for building medium-to-low cost housing.
Article 9: Conduct audit on entry qualifications and capital sources for land auctions. Impose a fine and withdraw land from developers if the land stands idle for over 2 years. Ban illegal land resales for developers who not yet reach at least 25% of the construction investment amount.
|(6)||Regulate demand for housing market. |
Article 10: Implement "purchasing restriction" that counts on number of flat(s) owned in a family.
Permanent residents who already own one flat, or non-permanent residents who own no flat but can provide tax proofs or social insurance contributions for a continuous 5-year period can only purchase one (more) flat.
Permanent residents who already own two flats, non-permanent residents who already own at least one flat, or non-permanent residents who fail to provide tax proofs or social insurance contributions for a continuous 5-year period cannot purchase any (more) flat.
Article 11: Reinforce audit on qualification of home purchasers to ensure proper implementation of "purchasing restriction". Close cooperation between various departments to improve information sharing and verification system on fake proof documents of home purchasers.
|(7)||Establish accountability system. |
Article 12: Seriously implement each task of the property market measures.
Article 13: Close cooperation between various departments to ensure proper implementation of all the property market measures. Manage land resources to stop occurrence of continuous historical high prices during land sales.
Article 14: Implement accountability of governmental departments if they cannot fulfil the above goals.
|(8)||Insist and strengthen mass media lead. |
Article 15: Strengthen media to lead rational home purchases. Promote positive results of the property market measures and provide strong media supports to these administrative measures.
As the above table is intended to emphasize the new "Beijing 15 Articles", some well-known contents of the "New National Eight" are hence not included. For those who want to know the full details about the "New National Eight", please read: How New National Eight can cool China property market for a direct comparison.
It is obvious that the new "Beijing 15 Articles" is the most powerful weapon we ever heard in China for cooling property market. If you compare it with Shanghai's version (the so-called "Shanghai 9 Articles") released on 1 February 2011, you may find that Shanghai only extended the "New National Eight" Article 6 to include the following "purchasing restriction":
In Shanghai, permanent residents who already own one flat, or non-permanent residents who own no flat but can provide at least one-year tax proofs or one-year social insurance contributions within a 2-year period can only purchase one (more) flat. Permanent residents who already own two flats, non-permanent residents who already own at least one flat, or non-permanent residents who are not able to provide tax proofs or social insurance contributions within a 2-year period cannot purchase any (more) flat.
That said, Beijing restricts foreign home purchases for a continuous 5-year period, while Shanghai only restricts for one year.
We therefore expect the new "Beijing 15 Articles" will inevitably freeze the transaction volume in the second-hand property market and also boost rents like Shanghai, although the impacts will be more severe in Beijing. Read more about: Shanghai Property Tax Freezes Purchases and Boosts Rents. In 2010, the average residential rents in Beijing rose almost +16% YoY already.
The Chinese property market cooling measures were widely expected for quite a long time, with just final details not clearly expressed, now the most powerful "Beijing 15 Articles" have come out. We disagree with some speculators who say the "Beijing 15 Articles" signal the removal of the policy overhang. Due to the symbolic status of Beijing, China's political capital, we expect more and more other Chinese cities will follow its direction.
The "Beijing 15 Articles" will be likely to go nationwide, will then reduce national transaction volume and property market demand, and will also induce potential property price correction in China as a whole. Though the "Beijing 15 Articles" may spread over on a national basis at a later date, it may temporarily fuel purchases in other Chinese cities as investors rush to buy homes before any such happens.
Although the "Beijing 15 Articles" can be so powerful, it is also quite controversial among Chinese scholars as restricting property purchases by non-permanent residents causes potential discrimination to foreigners.