Business / View

Ironies abound in housing market

By ED ZHANG (China Daily) Updated: 2015-05-25 10:41

It's already reported that China's urban housing market is starting to pick up. A rise in business and in prices is obvious in the first-tier cities-Beijing, Shanghai, Guangzhou and Shenzhen-compared with the previous months.

Housing sales in second-tier cities, mainly those at provincial capital level, can only be described as not as bad as before.

This happens when the stern price control policies, which the central government imposed four years ago, are only partially lifted. Many components of the control mechanism remain intact.

Transactions in the large cities' housing market remain repressed as a result, when the economy is suffering from an overall lack of momentum and needs a boost from more robust market activities.

There is so much irony because all the housing price control policies, mainly aimed at steering clear of a real estate market bubble, were adopted more than two years earlier than the economy's all-round slow-down and transition, which began in 2013, and the slowdown didn't get to an alarming level until the early months of this year.

When there is such a double-negative match between an industry program, aimed at a man-made slowdown in such an important sector of the economy like urban housing development, and the decline in many indexes on the macroeconomic level, small wonder that the economy's performance was at its most sluggish point in more than a decade.

There is a second irony within China's urban housing program. When there is meager provision of small units for low-income people, there is perhaps too much regulation, including strict restrictions on price rises, on the rich buying and selling large houses.

Indeed, rich people should be encouraged, rather than discouraged, to spend their money in the national market, so long as they pay their taxes.

Housing is the most important asset for the average consumer. An increase in their housing-related spending will help the economy in many ways. It doesn't have to be major. An increase in just 20 or so of the largest cities is quite enough to generate new orders for struggling manufacturers, ranging from steel and cement makers to furniture and home appliance suppliers.

The irony on both macro-and industry-levels shows that China still has many policy options to add new fuel to the economy. It is far from being at its wits end in creating growth. And one most important weapon, so to speak, is to correct the policy-level mismatches and miscalculations of the past.

There may be a third irony in China's urban housing market. There is little differentiation in the monthly statistics about buying and selling in the 70 largest cities. Some cities, even though very large, are in a prolonged economic slump and suffering from negative growth in the number of their de facto residents, rather than people with residential registration.

It is hard to find reliable data reflecting the difference. No one can tell how many Chinese cities are witnessing negative or positive population growth, and where these tend to be.

In the meantime, some other cities, some of which can be quite small, or at least small to start with, have absorbed migrant labor from many other places. Many of them are on the east and southeast coasts. But their population and housing prices are not duly reflected in the national data either.

People are bewildered by the seemingly conflicting media reports that while so many new houses remain empty in the cities, there are equally many, if not even more, empty old villages in the countryside, after residents have migrated to work and live in cities.

Where have all the villagers gone? If they cannot afford to live in the newly built expensive apartment buildings, what kind of houses are they living in now? And how many such people are there in China? It is not easy to find the answers.

The author is editor-at-large of China Daily.

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