Tougher eligibility criteria for the purchasing of affordable housing will be introduced to ease the increasing pressure on low-income earners who want to buy their own homes.

"The economically affordable houses should go to those needy urban residents,'' Construction Minister Wang Guangtao said yesterday, while addressing a national real estate conference.

He said his ministry, along with the State Development and Reform Commission, plans to release a document that will put stricter requirements in place for those people who want to buy low-end housing, which has been built specifically for low-income earners.

The requirements are expected to fend off criticism being generated by the snapping up of low-cost housing by medium and even high-income earners. But a date for the release of the document has not been revealed.

An official survey estimates only about 20 per cent of urban citizens will qualify for the low-end housing, a steep decline from the current 70 per cent.

Since the economically affordable housing policy was implemented in 1998, the government has not introduced strict means testing requirements.

In addition, the move is expected to rein in excessive investment in the current bullish real-estate sector, as experts fear a speculative bubble similar to the one that appeared in the early 1990s.

Yesterday's conference was part of the government's strengthened efforts to guide China's real estate market.

The State Council released a circular on Sunday, detailing ways to maintain sustainable growth in the real estate market. Business insiders said the move indicates the government's intention to cushion the industry.

The notice said the government should focus on efforts to maintain the property market's healthy growth, and that government departments should improve their services for the real estate market.

The latest notice followed a circular issued in June by the People's Bank of China, which warned of a bubble that could burst in the sector, leading it to impose stricter limits on housing credit to minimize financial risks in the real estate sector.

The central bank's notice also required commercial banks to raise the down payment for luxury housing purchases and increase the threshold for developers looking for loans.

And despite the severe acute respiratory syndrome outbreak, investment in real estate soared by 34.1 per cent year on year to notch up 469.8 billion yuan (US$56.9 billion) from January to July.

From 1998 to 2002, the average growth rate of investment in China's real estate industry was around 20 per cent.

The fast growth of investment was accompanied by the increase of the average national housing price, which in the second quarter of this year climbed 5 per cent over the first quarter. At the same time, land prices went up 7.1 per cent and housing rentals rose 1.9 per cent.

Currently, the ratio between China's housing price in most cities and residents' average income is usually six times higher than the international average. In Beijing and Shanghai the ratio is 10 times higher.

In 2002, 26 per cent of China's commercial houses were unsold, breaking the international alert level of 10 per cent.

And in the first half of this year, the percentage of unsold houses had increased 8.6 per cent year-on-year.

Last month, the ministry launched a nationwide inspection to determine whether the nation's real estate development was overheated, and is ready to take pre-emptive measures to nip any such problem in the bud.

(China Daily Sep 3, 2003)