China to tighten land controls to curb housing inflation

China will tightly regulate land supply to boost affordable housing and to clamp down harder on illegal land use this year, the Ministry of Land and Resources said on Tuesday, as it seeks to contain housing inflation.

China has increased land supply for government-subsidized and small homes in the past two years to ease property prices for the benefit of first-time buyers, but some developers have built commercial properties on land slated for affordable housing, prompting an extensive campaign to punish culpable officials and executives.

"The illegal use of land will probably rebound this year," Gan Zangchun, a deputy chief of land inspection, said at a briefing.

On the one hand, demand for land is surging as shown in a survey by the ministry in early March; on the other, China is keeping tight controls on land supplies, Gan said.

"The demand for land as shown in the survey far exceeds the total amount of planned supply for this year," he said, adding that the supply shortage would only worsen in years to come.

"To be frank, the days when the demand for land for construction is fully met by supply are gone forever," he said.

China has since 2009 taken successive measures to curb housing speculation and inflation, launching a maiden property tax, restricting purchases of multiple homes, lifting the down payment for home buyers, and increasing interest rates four times since October.

The campaign has produced some tentative results, with average nationwide property prices in 70 major cities rising 5.2% in March from a year ago, a slower pace compared with February's 5.7%.

Gan said restricting land use would not necessarily lead to higher land prices, a major driver of soaring home costs, but he did not elaborate.

In China, all land in urban areas is owned by the government, which also largely sets prices. China has been trying to give the market a bigger say, however, by holding land auctions.

China has not issued a land-use plan for 2011, including how much can be used for housing. Government data showed the quarterly increase in residential land prices moderated in 60% of major cities in the first three months of this year.