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Rein in housing prices

(China Daily)
Updated: 2006-05-19 06:25

For grumbling consumers, the State Council's latest move to cool the property market is a mixed blessing.

To their relief, the central government is again tackling the runaway growth of housing prices. Yet, also to their suspicion, will these measures fail them again?

On Wednesday the Chinese Cabinet made clear its concern over the problems in the property market by vowing to adopt a combination of tax, credit and land policies to correct them.

Among the six measures the central government will take to ensure healthy development of the real estate industry, most are similar to what the policy-makers contrived a year ago.

At that time, they first launched a campaign to deal with skyrocketing housing prices, especially in a number of large cities like Shanghai and Beijing. One year later, unfortunately, double-digit growth of housing prices in some major cities has only made many potential house buyers regretful.

However, repeating measures that did not effectively bring housing prices under control in the past year does not indicate a lack of understanding for the underlying causes of soaring housing prices. Instead, it asserts the central authorities' confidence in their diagnosis.

By focusing on adjusting the structure of housing supply and increasing government input for construction of economically affordable or low-rent houses, the central government has prescribed the right medicine to the illness. The only problem is that local governments did not take the pill as they were supposed to do.

To seek immediate economic benefits from a property boom, some local governments are unwilling to stop the pace of housing price hikes.

Admittedly, a vibrant real estate sector can serve as a growth engine for local economies. But policy-makers at local levels must remember that it is not higher housing prices that make economies more prosperous.

On the contrary, local economies that finally decide the level of housing prices are the ones that flourish. Unchecked housing price growth that far outpaced income growth will inflate prices to eventually undermine competitiveness of local economies. By emphasizing measures to balance supply and demand in the property market, the central government is trying to drive home the necessity to fully implement them.

The measure concerning information disclosure is a new one that marks a swift response to emerging problems in the property market.

Loud public complaints about lack of credible statistics about the housing market have become one of the most eye-catching phenomena so far this year.

Property developers were not the only ones to contradict government officials on whether the market was short of supply, even national statisticians cannot agree with their local colleagues on the actual pace of housing price growth in some major cities.

Domestic homebuyers are fully justified to demand immediate government efforts to bring an end to such information chaos.

Inconsistent local and national statistics have left them totally confused, and misleading sale information provided by developers cost them even more. To rein in housing prices, correct information is absolutely needed for both policy-makers and consumers.

(China Daily 05/19/2006 page4)