Beijing (journalist: Tang Qunxiong) “excessive increase of real estate prices will restrain the buying needs of low-income families and is not good for the social harmony and stability, while substantial sudden decrease of the prices will cause problems such as sluggish consumption and economic recession. ”Professor Xu Jiayin, member of the CPPCC and Evergrande’s Board Chairman suggested establishing strict “three control measures”, namely “control land price, control taxes and charges, control profits” to bring housing prices down to a reasonable level so as to maintain the stable and healthy development of the real estate market.

Background
Housing becomes one of the biggest concerns that matter to people’s livelihood

Real estate, especially residential house, is a necessity for life. It is also an important part of ensuring people’s livelihood. Providing affordable houses for low and middle-income families is one of the biggest concerns that matter to people’s livelihood. However, in some places, the overly high prices are driving a large number of ordinary residents out of the commercial real estate market. Even those who have bought houses are burdened with enormous economic stress, which greatly affects their life quality.

Analysis
Three key factors determine housing price

“To adopt measures to prevent big fluctuation of housing prices and maintain sustained stability and health of the real estate market, the first step is to identify the five key factors that determine housing price. Xu Jiayin said the first factor is the cost of construction and supporting facilities, the second factor is financial, selling and management costs, the third factor is land cost, the fourth factor is various taxes and charges, and the fifth factor is enterprise profit. Normally, the first two factors reflect how an enterprise control costs while ensuring quality. They reflect an enterprise’s competitiveness. So normally no major fluctuation would occur. The last three factors are what really affect the fluctuation of housing prices.

“Once the government applies strict control on land prices, taxes, charges, and enterprise’s profits, and maintains sustainability and continuity of policies, housing prices will decline. and when the prices reach to a certain level, it will remain stable for a long time, and the market will maintain stable development for a long time, ” said Xu Jiayin

Suggestions
Reduce housing price with “three control measures”

Xu Jiayin suggested applying strict “three control measures”, namely control land price, control taxes and charges, and control profits, to bring housing price to a stable and reasonable level. So far, the average ratio of land cost to housing price in cities has reached around 30%, real estate companies add such a high cost to housing price, thus driving up housing prices.. “Excessive price increase is not good for the sustained and healthy regional economic development either. Xu Jiayin said, “I suggest that the Central Government improve the real estate taxation system, and abolish most unreasonable taxes and charges.” this will help bring the prices down. ”Xu Jiayin suggested imposing “real estate tax” computed on the basis of an enterprise’s net profit in place of the land VAT paid in advance which is computed on the basis of an enterprise’s gross profit because it is an artificial added value Rough estimates show this measure alone can help real estate companies save up to 17.4% of the development costs.

Providing affordable houses for low and middle-income families is not just the responsibility of the government, but also the responsibility of real estate companies. Real estate companies should pursue reasonable profits in the capacity as a corporate citizen. The excessively rapid growth of housing prices will result in bubble economy once the growth is beyond the market’s bearing capacity, and will eventually harm the fundamental interests of various parties including the real estate companies. “Granted, the real estate industry is a capital-intensive industry with high input and high risks, but profits should still be maintained within a reasonable range. ”Xu Jiayin said “the Central Government should ensure that the profits of real estate companies are maintained within a reasonable range, once profits exceed such range, special taxes should be imposed.”

The leader of the economic team said during an interview that Mr. Xu’s proposals reflect the voice of ordinary people as well as his resolve to actively fulfill his social responsibility.