A string of well-orchestrated government cooling measures have dampened a nationwide frenzy to buy apartments and houses.

Now more people are waiting for big price cuts. But will such substantial discounts materialize?

When Xie Jiajing, chief economist of the Ministry of Construction and director of its real estate management department, last week poured cool water on those in the waiting lines, her caution caused wild diatribes among Web surfers, who chided her for siding with the property developers.

Xie said she did not anticipate a deep decline in housing prices because "it is simply not in the interest of the public."

Potential buyers, annoyed by the senior official's assertiveness, vowed to freeze deposit accounts in the bank and shun the property sellers for as long as possible till bargains are given.

If such actions are taken, these consumers may reach their goal of purchasing an apartment with lower prices. However, many will have to wait for many more years, if not ever, to own a house.

A collapse of China's urban real estate market, which economists believe would be triggered by a six-month boycott, will have crushing implications on the Chinese economy.

A housing market breakdown, as shown in Japan and Hong Kong in the 1990s, may easily lead to a financial and banking system meltdown, and later an economic crisis.

And a recession in which huge numbers of people cannot find jobs would be nightmarish for a country like China with a population of 1.3 billion.

That is why Xie issued her warning: Do not expect big cuts, but stabilization of prices. She also said that the government won't let its macro-controls on the property market affect the safety of China's financial system, which is undergoing crucial restructuring to discard bad loans and spruce up performance.

Then, does China's sizzling economy need to be slowed down? Or, does China's real estate bubble need to burst?

Certainly. When up to 800 people are strewn about on a busy Shanghai street, queuing to buy an apartment building for which the average price is 18,000 yuan (US$2,172) per square metre, one has to ask: what has gone wrong?

A series of mishaps has exacerbated the housing troubles.

The first is price cheating. Speculative dealers in Shanghai and some other coastal cities inform their customers that unnamed tycoons have already snatched up more than half of the apartments just opened up for sale, thereby causing a supply shortage and a steep rise in prices.

The second problem is local government's connivance and collaboration in hiking housing prices. Some deliberately raise the price of land to beef up local government revenues.

The third problem is overseas hot money speculation. Those betting on China's currency revaluation have bought Chinese assets, hoping to capitalize on a rise in the yuan's value.

China's policymakers have tried hard to steer the galloping property market to a more sustainable path.

Macro-control measures such as forbidding transfer of unfinished apartments, raising mortgage rates, and levying a 5-per-cent profit tax on the sale of all houses resided in for less than two years, are quick answers to the buying spree and market speculation.

However, the controls require attentive tuning. Any bundling of the policies could lead to property market stagnation, if not a collapse.

(China Daily June 19, 2005)