‘Fighting housing bubble needs subsidized homes’
Global Times April 07 2011 ‘People’s Daily Online (PO) talked to Huang Lan (Huang), deputy secretary-general of the China Real Estate Chamber of Commerce, and Wen Linfeng (Wen), deputy director of the Housing Industrialization Promotion Center at the Ministry of Housing and Urban-Rural Development’
‘PO: What kind of targets can convince the public that the government is sincere? What kind of price rise speed is feasible?’
‘Wen: Local governments have already released several policies linking property price controls with GDP or purchasing ability. I believe that each city should have its own criteria. It’s unreasonable to adopt the ratio of property price to income as a norm to evaluate the control target in bigger cities, such as Beijing and Shanghai, where the housing prices have already rocketing to unexpected highs.’
‘The ratio could reach 20 or 15 to 1. Let’s say, for instance, that the per capita disposable income of people in Beijing last year was around 30,000 yuan ($4,584) and the average property price was 20,000 yuan to 30,000 yuan per square meter. So the low- and middle-income families still could not afford an apartment even if the price falls by half.’
‘Consequently, we should enlarge the amount of government-subsided housing…’
‘Huang: The targets local administrations released are all soft ones, which are related to GDP growth and an increase in residents’ disposable income. Why did they not mention the hard targets? We need to rethink the harm that rigid regulations on property price might cause.’
‘The massive decline of housing prices before and after the previous financial crisis in Hong Kong left many people in debt. The property bubble in Japan also triggered an economic recession nationwide. It was not simply a matter of housing price controls, but also a complex issue concerning the fundamental economic structure.’
‘It’s actually not right to blame everything on property prices…’
‘PO: What other problems are there in the current property market?’
‘Wen: In some regions which were not very popular in the past, 90 percent of the capital has flowed to property purchasing for potential appreciation now, leaving many houses vacant.’
‘PO: What do you think is the most effective control measure? Wen: Property-purchasing limitations are the most effective means…The housing prices in cities where there are no home-buying restrictions is still ballooning, such as in areas around Beijing and some third and fourth-tier cities.’
‘We must maintain that houses are for living rather than for investment. Each family can own at most two apartments. Otherwise, the housing prices could not be cooled down.’
‘Huang:..The public is firmly convinced that property is the best investment, since they expect high inflation. Therefore, most people chose to invest their money in property.’
‘Fundamentally, the land price also plays a dominating role in the skyrocketing housing prices, which would decrease immediately if we could bear a thorough comprehension of land prices. It is, however, a double-edged sword.’
‘Do we need a stable and prosperous property market or a flat, slumped one? It is a choice. Anyway, what we seek is to stabilize rather than suppress or stamp down on property prices.’
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