The Policy Impact On The Real Estate Industry - 1163 Words

The Policy Impact on the Real Estate Monopolist in China Just a couple weeks ago, many cities in China have begun to loosen the restriction. In China, 2010, Chinese central government issued a housing restriction policy, which limited families’ purchase of housing and commercial loans for the real estate companies. It supposed to control the demand of the real estate, and lower the housing price. However, after following this policy for 4 years. The housing price still keeps growing. Many small real estate companies were heavily effect by this policy. Some of them had exited this market. However, the financial statements from several big real estate companies in China indicated that these companies were making more profit and experiencing†¦show more content†¦The second reason is the monopoly in land supply. In China, lands are owned by state. Government is the only supplier in land market. In many cities, the land auctions are a major source of fiscal income. For profit-oriented land finance of local government, the govern ment actually controls the price of land by controlling the quantity of supply. With the price much higher than it should be, new entrants cannot afford it or make profit by using it. In an auction notification in 2014 in Shenzhen (one of the biggest cities in China), a parcel of land with a permitted construction area of 500000 square meters was given a starting price of 6.72 billion yuan (1.1 billion dollar). In fact, even after the auction, the land is still owned by state, the company just gets the right to use it for 75 years or shorter. The third reason is the imperfect dissemination of information. The housing information is mainly control by the companies. Many of the information are not released. For example, all the information we can access is the total average price and trading volume. Obviously, the companies have more information than ordinary people. Before the government regulation in 2010, there are many real estate companies in the market. For example, even some breweries engaged in real estate. It seems like a competitive market will many buyers and sellers. The regulation policy in 2010