In China’s housing market, there is a gray area called “small properties”, structures which are illegal in the strict sense but still can be found almost everywhere across the country. The word “small” does not pertain to the size of the properties but it is all about the limited property rights.
Small properties generally refer to those residential buildings erected on collective homestead which are supposed to serve agricultural purposes. Transactions are subject to severe restrictions. The government bans city dwellers from purchasing these properties and also refuses to grant property deeds and land titles to other buyers.
Despite such incomplete ownership, it has not prevented small properties from springing up all over the country. The reason is simple: street value of this housing is as low as one third of the price of commodity housing units with full property rights, offering low-income groups, especially migrant workers, a chance to get affordable accommodation along the remote areas of cities.
Now, several Communist Party media organs have reported that Beijing may ease its regulation on small properties as part of broader reform to phase out the binary household registration in the country, push forward collective land transfer and urbanization drive, and stabilize the runaway home prices.
Rumor has it that the upcoming meeting of Party elites next month will come up with concrete measures to turn small properties into commodity houses, a reform that will revitalize the value of small properties. Homeowners are likely to be asked to pay a certain amount of land premium in exchange for complete property deeds and land titles.
Along with the full property rights, homeowners will be granted permanent residence in the city as matter of course, which will entitle them to more holistic urban welfare. Thus, small property reform could be a springboard for peasants or migrant workers to gain formal status as urban dwellers and settle down in the cities.
By switching small properties into commodity homes, authorities can invigorate huge idle stock of housing in the country. According to the estimates of China National Radio, the possible reform can nearly double potential supply in the free market of Shenzhen, where there are plenty of such small properties.
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