Overheating county housing prices need dampening

Since the government has tightened its macro-control on the real estate market in first- and second-tier cities, some real estate developers and speculators have diverted their attention to smaller counties, putting local housing price rises in the fast lane.

Statistics show that the average housing price in more than 100 counties, mostly in the coastal regions such as Zhejiang, Jiangsu and Fujian provinces, had surged above 10,000 yuan ($1,545) per square meter by the end of last month. Some counties have seen their fastest housing price rise in recent years over the past few months. This can be explained as a "spillover effect" from the strictly-controlled real estate market in cities. But it is the county governments' acquiescence that has laid the foundation for the "spillages" to push up the housing prices, as the governments can secure a dramatic increase in their revenue from land sales along with the fast surge of housing price.

Last month, the Ministry of Housing and Urban-Rural Development set a ceiling on the height of residential buildings in counties－no more than 18 floors. That means the authorities have already realized the urgency of putting the county real estate market under tight control. That is further stoking the market's expectation for land and housing prices to rise, prompting small real estate companies to elbow their way into the land market of the counties.

Statistics show most homebuyers in the counties are well-off private business owners or local residents whose old houses are demolished to give way to new ones in the government's urban renovation projects. The latter can buy new homes at a subsidized price. That means the high prices are deterring many young people from buying houses in counties, as they are in cities.

Yet it should not be forgotten that counties are the first choice for most migrant workers after leaving their rural homes, and the only choice apart from villages for many after the housing price in cities have rocketed far beyond their reach. And if the threshold for settling in counties is pushed higher and higher, many of them will have to go back home. That will undoubtedly affect consumption, urbanization and rural revitalization, all key growth drivers in the central authorities' policy toolbox.

The central government should take concrete actions to cool down the county real estate market in a timely manner to prevent it from threatening the healthy development of the county economy, a crucial link between cities and villages.