标题: how government subsidized housing program for low-incomed people will impact [打印本页] 作者: NYboy 时间: 2008-11-10 14:12 标题: how government subsidized housing program for low-incomed people will impact
China’s State Council held a meeting on November 5, which introduced 10 measures to further expand domestic demand and stimulate economic growth. The first one is to accelerate housing development for low-income groups that cannot afford other homes. Specifically, governments plan to give more support to build low-rent housing, to reconstruct shantytowns, and to expand experimental programs of dilapidated housing rebuilding in rural areas. The first measure is to accelerate housing development for low-income groups that cannot afford other homes, showing governments have a strong expectation that such development would shore up Chinese economy. (Housing for low-income groups that cannot afford to buy their own homes includes low-rent housing, affordable housing, price-limited housing, and even mid/low-priced or mid/small-sized residential properties.) Response by local governments should be the key, as potential investment could be primarily made by local governments. How can local governments raise money? How can they benefit from building housing for low-income groups? We believe the policy has limited short-term effects as it aims long-term development, and minor impacts on property market, but could help to accelerate urbanization process. Ø Stepping up efforts on building low-rent housing is a right goal, but has limited effects in the short term. Local governments have to raise money by bond issuance and bank loans. They prefer to invest in infrastructure, as the move can attract private investment, prop up economy and increase their tax revenue. In comparison, building low-rent housing can yield little returns and needs to be subsidized. Local governments are unlikely to build low-rent housing for a long time, unless their tax revenue sources become sustainable. Overall, we believe such high-profile gesture usually end up with small-scale actions. For example, China began to build more low-rent housing in early 2008, but such fiscal budget is just Rmb6.8bn, or less than 2% of fiscal revenue. Indeed, it is fair the percentage rises to 5~10%. Ø The latest policy has limited impacts on property markets. Policy makers now plan to build more low-rent housing instead of affordable housing, leaving few negative impacts on property markets. Such a plan can fuel domestic demand and stabilize property market. On the contrary, if governments step up efforts on building affordable housing and price-limited housing, the negative impacts on property markets would be significant. Ø The policy helps to accelerate urbanization process. In addition, shantytown reconstruction can fuel demand for residential properties, while dilapidated housing rebuilding in rural areas helps to accelerate China’s urbanization process. Overall, the latest policy is both positive and negative to property markets, but impacts should be limited in the short term. Ø Investment strategy reiterated: The worst time has yet to come and property sector is unlikely to turn around. Investors are still advised to buy industry leaders on dips and adopt a range-bound trading strategy.
