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Highlights of July 13 Press Conference on New Rules of Shanghai Residential Properties Leasing

Gu Changhao, deputy director of the Legislative Affairs Office of the Shanghai Municipal People’s Government

Pang Yuan, deputy director of the Shanghai Municipal Housing Security and Administration Bureau

Now TV of Hong Kong:I have two questions. First, have you estimated the impact of these new rules on the local housing market? Will people who originally planned to buy a home now decide to lease instead? Will this affect the home prices in Shanghai and push up the rent?

Second, have you estimated how many people are homebuyers and how many are renters in Shanghai? Do you have any data to share? Thank you.

Pang Yuan:The new amendments aim to regulate the leasing market which has some problems at the moment. The new rules are not directly related with home prices and rents. The city has two home supply systems. One is the real estate market system, which includes selling, buying and leasing of commercial residential properties. The other is the affordable housing program, which includes budget housing, low-rent housing, and housing for families relocated by public projects.

To your second question, as far as I know, housing transactions totaled about 160,000 units in 2009 and over 90,000 units in 2010. These figures include both new homes and old properties. You can find these figures on the government website. The leasing market is also an important source of housing supply. Statistics showed that there are more than 30 million square meters of second-hand homes on the leasing market, and more than 90 percent of their tenants are not registered Shanghai residents. We want to regulate their leasing activities and provide homes that are legal and compliant with rules. It will help stabilize housing prices and rents if the leasing market is well regulated.

Shanghai Morning Post:My first question is for Mr. Pang about the official filing of leasing contracts. The new rule said property owners and tenants must file their contracts with an official agency starting in October. Does it cover all the tenants? If tenants fail to file their contracts as official record before October, do they have to make up after October? If they don't, what are you going to do with them?

My second question is for the Municipal Government spokesman. Currently Shanghai Metro has shut down 22 OTIS escalators for safety check. Eight are in Xinzhuang Metro station. What is the latest development about these escalators?

Pang Yuan:The new regulation requires that all contracts signed after October 1, 2011 should be officially filed for the record. I've made explanation earlier about the need for contract filing. Should this regulation be applied to contracts signed before October 1?

Gu Changhao:All leasing contracts should be officially filed. Shanghai introduced the filing system in 2004 and the new rule will reinforce the system. The major change in the amendments is that if tenants and property owners fail to file their contracts after October 1, authorities will fine the relevant agencies from 3,000 yuan to 30,000 yuan.

Chen Qiwei:The shutdown of some OTIS escalators has drawn wide attention from residents and relevant government departments and enterprises. City officials have urged concerned parties to work out safe and practical solutions to the problem.

According to an urgent notice issued on July 6 by the General Administration of Quality Supervision, Inspection and Quarantine, Shanghai Metro operator suspended the 22 OTIS escalators, eight in the Xinzhuang Station, eight in Shanghai South Railway Station, two in Panguang Road Station, one in Huamu Road Station, Two in Gucun Park Station and one in Liuhang Station.

Taking into account the passenger volume and safety concerns, the Shanghai Bureau of Quality and Technical Supervision today decided to take the following measures after consulting with relevant departments.

Tomorrow four of the eight escalators in Xinzhuang Station will resume service after safety check. The remaining four will resume operation after July 15. OTIS and Shanghai Metro should come up with a contingency plan and instruction for safe use of escalators.

Official quality inspector will examine the repaired escalators and ensure they will operate safely. Adjustments will be made after the cause for the Beijing subway accident is confirmed.

China National Radio:I have a question for Mr. Gu Changhao. We know that flat-share by a group of people has become a serious problem in Shanghai. Mr. Gu just mentioned many problems that result from flat-share. After the new rule’s promulgation, are there specific measures to effectively eliminate the practice of flat-share?

Shanghai has tried to cope with the problem of group flat-share for a long time. The 2004 policy stipulated that the minimum living space per tenant should be at least 7 square meters. But there is a loophole in that policy as it did not separate bedroom space from other apartment space. Thus, property owners could count in the space for bathroom, kitchen, storage closet, etc. and claim it is legal to lease a 100-square-meter apartment to 10 tenants.

This time we base the living space on the number of bedrooms. For instance, a two-bedroom apartment can only be rented to two tenants. This allows us to determine how many people can share one apartment. The minimum bedroom space per tenant is 5 square meters. This is the guiding standard. If two individuals are sharing a 10-square-meter bedroom or their parents want to stay for one night or two, it certainly violates the rule, but we cannot say they are illegal because of the common ethics.

However, if the situation lasts for a month or even longer, their neighbors can file a civil action to the court or ask for administrative intervention. This is the legal condition for the standard we set this time. We find it is more effective to solve a flat-share case through court than through administrative punishment.

I would like to add something concerning the official filing of leasing contracts. We will impose a fine less than 1,000 yuan on an individual, a fine less than 10,000 yuan on an enterprise, and a fine between 3,000 and 30,000 yuan on a real estate broker for failing to provide leasing contracts for filing.

China Securities News:During Shanghai Party Secretary Yu Zhengsheng's visit to Hong Kong, he said the government did not clamp down on Shanghai’s real estate market, only tried to restrain it. Speculators will have to pay a higher price if they buy properties for investment in future, but the city will not ban investment purchase of local houses. Does Mr. Yu’s word imply a change in the real estate policy?

Pang Yuan:Shanghai will resolutely carry out the central government’s tightening measures to cool the real estate market. We will ensure housing supply for people who genuinely need a home while restrict speculative buyers. It's not just a slogan. We have attached local provisions to the central government’s policy on limiting the number of homes a family can buy. Shanghai has also started collecting property tax on a trial basis with guidance from relevant departments of the central government. This can satisfy people who have a need for housing. I am not aware of any policy change as you have said.