ST : Low-cost housing still out of reach

Sep 6, 2010

Low-cost housing still out of reach

Few financing options available for Shanghai's low-income buyers

SHANGHAI: After months of anxious waiting, Ms Wang Jinxia finally obtained a coveted spot in Shanghai's trial afford-able-housing programme, but now the former factory worker is scrambling to pay for it.

The 53-year-old divorcee, who took early retirement years ago, is desperate to move after living for eight years in a 60 sq m Shanghai apartment with her octo-genarian parents and two other relatives.

'I've been stressed out recently. I have many new grey hairs. I will have to pour all of my 70,000 yuan (S$14,000) savings into this,' Ms Wang said outside a makeshift centre for mortgage applications at a local school.

She is among the first batch of about 1,940 families selected to buy low-cost housing selling for about one-third of market prices, as part of a new affordable housing campaign in the city of more than 20 million.

But Ms Wang and others find even 'affordable' housing out of reach, due to limited financing options for low-income buyers - a hurdle for government efforts to quell public concern over skyrocketing prices.

China's public housing programmes have been neglected for years, as local governments sought to cash in on spiralling property prices with more upmarket developments. But a growing outcry over the past year has put affordable housing back on Beijing's agenda.

The stakes in the housing programme are also high for the economy. It grew 10.3 per cent in the second quarter of this year - slowing from a blistering 11.9 per cent in the first quarter - as Beijing took steps to cool soaring property prices.

'The social housing programme is on track and will constitute an important cushion for any potential slowdown in private, market-based residential property construction,' Morgan Stanley economist Qing Wang wrote in a note.

Beijing's ambitious target to build 5.8 million affordable housing units this year is aimed at preventing a hard landing for property investment growth, and propping up demand for basic materials such as cement and steel, said the economist.

If it succeeds, the programme could boost China's economic growth by up to one percentage point or more, said property analyst Bai Hongwei of China International Capital.

However, only limited and fuzzy official data is available, and the push has been blemished by reports of insufficient land and high-income earners exploiting loopholes to take social housing spots.

Analysts estimate that only 40 per cent of the housing local governments pledged to build last year materialised, as they continued selling land to developers at market rates, and it may rise to 50 per cent this year, at best.

In May, Beijing told local officials that affordable housing would be part of their performance appraisals.

To qualify for the trial, a family's average annual income per capita must be less than 27,600 yuan, while each member's current share of floor space must be under 15 sq m. Yet once chosen, participants must still find a way to pay for the home.

'No bank wants to do this. It's not a profitable business,' said a mortgage officer at the makeshift centre. 'We are here because the government instructed us.'

For Ms Wang, a mortgage for the newly built 70 sq m home on the city outskirts would cost 2,200 yuan a month.

That is 43 per cent of her and her parents' combined pension, payable over 16 years, the longest period the bank offers.

She has persuaded the developer to give her three months to come up with cash to buy the apartment as she asks friends to lend her money. But success is still far from certain, she said.

AGENCE FRANCE-PRESSE