Tight controls vital for a healthy housing market

Five large real estate enterprises in China invested 11.05 billion yuan ($1.75 billion) to bid for land from Nov 13 to 15, reports say.

But with the final price fetched for some land being 44 percent higher than the bid price it would appear that a new round of price hikes is just around the corner.

The phenomenon is caused by different factors. The Chinese economy is expected to enter a new phase, with property developers feeling the authorities will loosen controls. Some local governments are also eager to increase their revenues from land transfers, to relieve their debt burden.

Traditional thinking has it that the central government will yield to the pressure of economic decline and repeat its former stimulus packages. But the biggest challenge for the Chinese economy is not growth, but transformation. So the real estate market will experience fundamental changes if the country's economic growth model is successfully transformed.

The new leadership of the Communist Party of China has put people's livelihoods at the top of its agenda. High housing prices are proving to be an important factor affecting people's lives, and the government has already accelerated construction of publicly subsidized houses to meet public needs.

A rapidly aging society, along with the nation's family planning policies, means that demands for homes will gradually decline. The government's tight control of the housing market is also preventing speculators from investing in real estate.

China must continue its tight controls and maintain stable prices for housing. The authorities can also consider levying taxes on empty houses.

Supervision by the authorities should ensure that the real estate market becomes healthier. But governments, enterprises and investors should change their mindset from purely seeking to profit from price hikes for land and property.

Translated from 21st Century Business Herald By Li Yang