Real Estate

Improper allocation of housing units, misuse of funds and an insufficient supply of land are undermining China's massive affordable housing program, a report by the State Audit Office said on Monday.

The office, which reports to China's cabinet, said 4,428 affordable homes were kept vacant for too long, 4,247 units were allocated to unqualified families, and another 4,407 units were used for purposes other than providing shelter for low-income families.

The State Audit Office released the data as part of implementation of the government's budget in 2010, when it also disclosed local government debt.

Shenzhen will impose a transaction tax on existing home sales based on a reference price determined by market conditions, the city's taxation administration said in a statement on its website.

The measure will be implemented if the contract prices of the homes are too low without reasonable explanation, the statement said. The measure will begin on July 11.

Low-income house under construction in Wuhan China.

China acknowledged it was falling behind schedule on ambitious plans to build low-income housing, a delay that could add to concerns around its economy.

The low-income housing push is crucial, not only as a way to help ordinary Chinese buy homes, but to provide an economic cushion at a time when signs of a real-estate downturn are emerging. Prices of new apartments and the volume of construction have begun to fall in some cities. A big spurt in low-income housing construction has been seen by the government and markets as important to reduce the depth of a real-estate downturn in an economy heavily dependent on construction for growth. Beijing Friday pressed local governments to pick up the pace of construction.

Residential prices are heading downward in some major cities, damping some undesired real-estate speculation but raising the prospect that the Chinese economy may slow more rapidly than anticipated with profound consequences for global growth.

Real estate is a foundation of China's phenomenal growth record in the past two decades, and its health is crucial to China's construction, steel and cement sectors.

Real estate is also a favoured investment of Chinese looking to get better returns than bank deposits pay.

Local municipalities and provinces depend on rising prices for land sales as well to fund infrastructure projects.

World Bank economists warned at a Beijing press briefing that a real-estate bubble was among the biggest economic risks China faces.