Measures address Chinese housing price running wild
(Xinhua)
Updated: 2005-05-19 15:36

China's housing prices, which rose in a seemingly uncontrollable way for more than a decade, have at last cooled down somewhat recently amid boiling complaints and worries by both the public and the government.

A young woman looks at posters outside a real estate agency in Shanghai, April 23, 2005. The Chinese government has recently launched a series of measures to curb the skyrocketing price of housing. [newsphoto]

For example, Shanghai and Hangzhou, which had experienced a most heated price hike in the past years, have lowered their prices more than five percent within a month, indicating a significant signal that the government measures are really in conformity with the interests of people.

Last week, seven government departments of the State Council issued a joint circular in a bid to stabilize housing prices by smoothing out problems that have pushed the prices upward, a plan viewed by many as a key measure to fight soaring housing costs.

China phased out its free housing practices in the early 1990s and required all people to pay for their apartments. Not accompanied by policies and measures that would help prevent unreasonable price rises, the decision was followed by wild price rocketing that threatened to make most Chinese spend decades of income on housing.

In 2004, China's average housing prices rose 14.4 percent over the previous year, and during the first quarter of 2005, the prices for commercial housing and commercial residential apartments surged 12.5 and 13.5 percent respectively year on year.

In Shanghai, the average per square meter price in its urban and suburban areas exceeded 10,000 yuan (1207.7 US dollars) in 2004, with those of some residential apartments up 20 percent in a few months.

An 80-square-meter Shanghai apartment will be generally sold at700,000 yuan (84,700 US dollars). Locals' average annual disposable income is about 40,000 yuan (4,840 US dollars), the highest in the country.

The Economic Daily, a top Chinese economic newspaper that described the price hikes as "malformed," warned that the surface prosperity of the housing sector in the disguise of lofty prices could well invite violent ups and downs in the end and render potential cracks to the national economy.

"Slow or improper handling or control of the housing prices maywell result in problems that may spark setbacks in the country's development process," it said.

The sector has been playing an increasingly big role in the masses' economic life since the country stopped offering free rooms to its citizens a decade ago. The investment poured into it climbed from 12 percent in 1998 to 20 percent in 2004.

However, the proportion of affordable housing in the total housing, which is designed to help the needy with low-price apartments, had reduced from 6.1 percent in 2003 to 4.6 percent in 2004, indicating the chance for low-income groups to buy houses narrowed.

"Too high housing prices have become a problem that arouses wide concerns from different social circles," said the newspaper.

Economists tend to attribute the price hikes to an ill running supply structure of the country's commercial housings and a disordered real estate market.

Zhuang Jian and Tang Min, two senior economists with the Asian Development Bank, suggested that the government should impose heavy taxes on those who frequently buy and sell homes in a short period of time and further rise interest rates to rein in investment.

Limiting land speculation, adjusting market rules, levying special taxes and increasing trading costs and other proposals were on economists' solution list.

Echoing voices from the public and the economists, the Chinese government promised to adopt further macro control measures to cool down the housing price "heat" bit by bit.

"Solving the real estate investment boom and soaring prices should be one of the most important missions in strengthening the ongoing macro-economic control," said the State Council.

The State Council required all regions of China to make clear plans on the scale, distribution and schedule of construction of common commercial housing and affordable housing this year and next year, and make it public.

The government is also considering imposing a unified real estate tax to curb speculative buying, said Xiao Jie, vice minister of Finance, last month.

Though hating to admit the existence of bubbles in the propertymarket, property developers hope for more slowdowns of the price hike for fear of a bubble burst, say analysts.

According to insiders, there still remain big profit potentialsin the current property market. A latest list released by the Guangdong-based "New Fortune" magazine said 94 of the 500 richest people in China are in the real estate business. And real estate tycoons possess wealth worth 136.39 billion yuan (about 16.4 billion US dollars), 23 percent of the total wealth owned by the 500 people on the list.

In China, spending on housing construction accounts to only 42 percent, while land leasing fees, profits and other taxes and fees, take up 58 percent, compared with the 72 percent and 28 percent international norm.

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