The State Council's 15-point regulation issued on Monday is a
much-needed set of measures to cool down China's overheated real
estate market, but it will not solve all problems related to house
prices.
Nine ministerial departments jointly came up with these new
measures, which target both supply and demand, and are intended to
put some flesh on the bones of the State Council's renewed vow to
rein in runaway property prices.
The speed as well as the scope of the latest policy response
might cause a sigh of relief to come from many of the nation's low-
and middle-income households.
The prompt delivery of these tightening measures shows that the
departments in question have already reached a consensus on the
urgent need to increase the supply of affordable homes, and will
take other steps to ensure the property market's healthy
development.
The central government has made June 1 the starting date for
local governments to make 70 percent of their annual land supply
available for the development of low-cost housing.
By doing so, the central government has demonstrated its desire
to adjust the structure of housing supply, one that has been
excessively tilted against low- and middle-income households.
Meanwhile, the comprehensive nature of these new measures
indicated that policy-makers are improving their grasp of the
various but interwoven causes of emerging property bubbles.
For instance, an increase in mortgage down payments is aimed at
holding back a part of demand boosted by the self-fulfilling
prophecy that house prices will only climb higher and higher. The
policy will also force domestic banks to reduce their exposure to
housing loans. Warning lights are already flashing red as lending
to both house buyers and property developers grew explosively
against the backdrop of the country's macro-economic controls.
And new measures to prevent property developers from issuing
misleading sale information are also long overdue.
China's ongoing urbanization drive and the public's desire for
better housing are the most powerful forces currently driving the
nation's booming property market.
Yet, housing prices have become a particular public concern
because of their unchecked hikes, especially in some major
cities.
If rocketing house prices cannot be brought under control in a
timely manner, the property sector will be unable to continue its
healthy development, never mind continuing to act as a key engine
in the national's economy's long-term growth.
The success of this round of government efforts to tame the
overheated property sector will be determined by the rate of future
price rises.
The central government has been trying, without much success, to
rein in soaring property prices since early 2005. This bitter truth
bears out not only the difficulties to achieve this goal, but more
importantly, the necessity of ensuring the aggressive and credible
implementation of established policies.
Had many local governments thoroughly carried out the policy to
significantly increase supplies of affordable housing, local house
prices would not have rallied so vehemently.
Now, as policy-makers once again hit the brakes, they need to
look very closely to ensure the new measures work as expected.
(China Daily May 31, 2006)