China on course to squeeze property bubble
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Xinhua, October 5, 2011
Outlook is positive
"The government is combining short-term controls used to mop up liquidity and medium-term measures that will provide low-income housing to remove the factors that contribute to high prices," Wang said.
Price declines will be more evident in 2013 after more low-income homes go on the market, Wang said.
China announced earlier this year that it will build 36 million low-income housing units by 2015, of which 10 million will be constructed this year.
The government is hoping that the projects, which will account for 20 percent of the country's housing market by 2015, will help the housing market develop in a more healthy fashion.
In the first eight months of this year, local governments across China started building or renovating 8.68 million government-subsidized housing units.
Chen Guoqiang, vice chairman of the China Real Estate Society, said China sold nearly 9 million apartments last year, a record high since China reformed its property market in 1998, but smaller than the number of low-income homes that will be constructed this year and next year.
The continuous supply of low-income homes on such a large scale will significantly change the market's structure and greatly ease supply shortages, Chen said.
Government maintains grip
Despite slower home sales, the government has no intention of relaxing its grip on the market, as the overheated property sector only showed tentative signs of cooling after a series of heavy-handed tightening measures were put into place.
Premier Wen Jiabao stated in an article published earlier last month that China still faces relatively large pressure from housing price increases in both the short- and long-term, and prices in most cities remain at high levels.
It will take more time for the government's measures to demonstrate their full impact, he said, urging the resolute implementation of the regulatory policies to ensure their effectiveness.
Wang said China's measures to control the property market are at a critical stage and should not be loosened, as policy changes could skew the public's expectations regarding housing prices.
Yin suggested that the government should keep its prudent monetary policies and create policies that would allow the free trade of non-arable rural land.
Administrative intervention will prove to be the most effective tool in stabilizing the property market if institutional factors that keep prices high can't be eliminated, he said.
"In order to rein in skyrocketing housing prices, the government has no other choice but to impose purchase limits and increase the available number of low-income homes," he said.
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