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Does living in 'sin' up housing demand?
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By Wang Yong

Big mouths of the world, heed this "axiom": "The more you are scolded, the closer you are to the truth."

I first came across this "axiom" in a blog article published on Monday.

An economist from Beijing Normal University was using this "axiom" in his blog to justify his March 26 statement that "a higher divorce rate and an increase in the number of unmarried people living together has pushed up housing demand in China."

On March 26, professor Dong Fan, director of the Real Estate Center of Beijing Normal University, showed up in a real estate forum in Chengdu, the capital of Sichuan Province, as a guest speaker.

A local district government organized the forum and a number of real estate development companies sponsored it. No economist who sees bubbles in China's real estate business was invited.

"Is there a bubble in China's real estate business?" Dong asked, thus opening his speech. "No" was his quick answer.

After much meandering, he concluded that a change in lifestyle was at the bottom of a persistently strong demand for housing.

In Monday's blog, he said such a change - both divorce and cohabitation without wedlock - has reshaped China's housing market more than urbanization.

"China's divorce rate is much higher than before and, in theory, a divorced couple would need two separate apartments," he said. In Monday's blog article, he clarified this point by adding that "a married couple needs only one apartment." He seemed to forget that a married couple might well need an apartment twice as big as one needed by a divorced person.

Be it about divorce or cohabitation, he failed to support his argument with statistics or even general figures.

He snorted in his article on Monday: "Although I'm unable to calculate with precision (no one is able to do that), most members in the audience on March 26 agreed with me, judged from their wild applause." Well, it depends on the audience - many of them paid to hear his speech, right?

"It's not that my speech was shocking, but that the media seized too much on the topic of cohabitation," he said. "I rejected all requests for an interview after my speech (on March 26), which I gather might have agitated the reporters. Maybe they just wanted to teach me a lesson for refusing to cooperate - it's the way they work, they are determined to cook up a 'man-bites-dog' sensation."

The media, however, was fair. Although most media reports slapped professor Dong for his clumsy effort to establish a causal link between divorce (and cohabitation) and housing demand, they didn't distort his meaning at all.

His other arguments, if examined one by one, are even more preposterous.

For example, he said: "China's housing prices would have been reduced by half if the vast countryside were included in statistics."

He was blind to the fact that everyone has been talking about bubbles only in cities, and that villagers' houses are mostly non-tradable on the market.

He also said that income in China is opaque, while that in other countries is transparent (far from the truth).

How could he prove that all or most ordinary wage earners in China have gray income?

For professor Dong, there's no need for hard facts and figures.

"Some people come at me and push me for figures, but I don't have any," he reiterated on Monday. "Just read media reports and you will be convinced (about divorce and cohabitation)."

He went on to cite many media reports, apparently forgetting how he himself had called media veracity into question.

At any rate, those reports revealed only increased cases of divorce and cohabitation. No causal relationship between these increases and strong housing demand was established, or even suggested.

If, as Dong said, a change of lifestyle was so significant to the housing market, why didn't he mention tens of millions of poor farmers flooding into cities every year?

Their lifestyle surely has changed and they surely need shelter in a city. How could Dong possibly neglect them in his description of a new lifestyle?

He is not as slapdash as he appears. He knew that about 20 million migrant workers had lost their jobs in cities and returned to the countryside without having been able to buy a tile, let alone a roof in the cities.

Dong knew when and where to shut up, after all. Money often does decide what a scholar has to say.

It's an open secret that some real estate developers buy scholars' mouths with real money - solid money without any bubble. That's why these big-mouth scholars bridle when anyone says there's a housing bubble.

I'm not pointing the finger at professor Dong. But for their own good, big-mouth scholars should invite authorities to look at their bank accounts.

If their hands are dirty, they have sold their souls to the devil.

If their hands are clean, we should stand in the deepest awe of their courage to trade reputation for the truth.

(Shanghai Daily April 1, 2009)

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