Domestic Affairs

Govt sees real estate as silver bullet

By Zhang Jin (chinadaily.com.cn)
Updated: 2010-07-13 15:55

Housing again became the buzzword. And the debate went on over whether the government has loosened or will loosen tightening policies, which are designed to place a lid on housing prices.

Some said the policies are losing steam, citing reports that Shanghai banks are quietly granting loans to third-home buyers, which is prohibited. Others said tightening policies will stay, citing the government's renewed pledges.

The sad part of the story is that all seem to agree that these measures will be scrapped one day.

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Indeed, many are analyzing data for signs of an economic slowdown in an attempt to decipher when austerity measures will be phased out, either openly or quietly.

There is no doubt the government still thinks the property market is a silver bullet during economic blues.

A stimulus to many other industries such as steel, a robust property market is believed by some policymakers to be a quick cure to economic slowdown.

The belief is understandable. The fact that government is using monetary and administrative policies, instead of taxation, shows that it wishes to leave some room for quickly reviving the property market in case of a downturn. After all, these policies can be scrapped within days, while scrapping a tax requires a lengthy legal process.

And if past experience is any indication, the loosening of policies will herald a fresh round of price hikes in an uncontrolled fashion that will drive housing out of the reach of many.