Property curbs working to potential

Lanzhou, capital of Northwest China's Gansu province, has reportedly eased the property tightening policy in some of its districts despite local authorities' denial previously, raising public concerns that such measures could be eased nationwide.

If the authorities impose property tightening measures in areas where real estate transactions are not very high, the measures, instead of curbing housing prices, might have a negative impact on even genuine homebuyers as opposed to speculators. The Lanzhou authorities have eased the restrictions on housing purchase policy only in those districts where few people buy houses, not in the areas where the demand for property is high.

The restrictions were imposed to curb soaring housing prices. So they should be lifted after the rise in housing prices is curbed, or declines. In major cities where the housing demand still exceeds supply, the tightening policy continues to be in force.

Ensuring every household's demand for housing is met and people's livelihoods are improved are among the principal goals of the government. And since people's living conditions will improve in accordance with the increase in their incomes, the establishment of a multiple housing supply system would satisfy the demands of people of different income levels.

China is exploring a joint-property rights housing system and a developed rental housing market to meet the housing demand of the households that cannot afford to pay for commercial housing. Since housing is for living in, not speculation, it is not necessary for everyone, especially those with limited purchasing power, to buy commercial housing if joint-property rights housing can meet their residential need.

Given that incomes are increasing at a much slower pace than housing price rise, it doesn't make sense for everyone to purchase commercial housing just to enjoy total property rights. If the rental housing market is developed and enough houses are offered on lease, they can satisfy many people's residential need. As such, joint-property rights housing and rental housing could partly reduce people's demand for commercial housing, and thus help curb the soaring housing prices.

Of course, the real estate market should be regulated. But commercial housing should continue playing a major role in the housing market. Some people argue that China should take a page or two out of Singapore's housing system, which provides affordable housing including joint-property rights housing for a majority of its citizens, to streamline its housing market. But that would mean the government shouldering the responsibility for housing supply.

Instead, what we need is sufficient supply of affordable housing. In market economy, the market should play a crucial role in resource distribution, which means the market should decide housing supply. During special periods, however, the government could play a greater role in housing supply. For instance, when the housing price to income ratio is extremely unreasonable, the government should help meet a part of the housing demand.

A normal market, including the housing market, should use purchase-restriction policies as little as possible, because they restrict the market from playing its due role. After the basic residential demand is met, the market should be allowed to play a leading role in meeting the demands for better, even luxury, housing. And for the mid-to high-end housing demands, purchase restrictions are not only unnecessary; they could also distort the market.
Socialism with Chinese characteristics has stepped into a new era, and the principal contradiction has evolved to be that between "unbalanced and inadequate development and the people's ever-growing needs for a better life". The demand for mid-to high-end housing should be seen as a demand for a better life.

The housing market reform is vital to sustainable and healthy economic growth, but to achieve the essential goal of property tightening measures and to end housing speculation, the authorities should also expand housing supply.

The author is a research fellow at the National Academy of Economic Strategy, Chinese Academy of Social Sciences.