Hardly a cabbage patch

During a discussion of China's real estate sector at this year's annual conference of the Boao Forum for Asia in Hainan Province on April 19, Ren Zhiqiang, a controversial figure in the real estate industry, raised a firestorm of criticism when he claimed that in comparison to the increase in income over the last few decades, housing prices have not risen at all.

Ren, chairman of the Huayuan Group, a leading Beijing-based housing developer, used the example of people's income and the price of Chinese cabbages during the past three decades to support his claim. In 1978, he said, the average monthly salary was only 28.67 yuan ($3.8). It has increased 100 fold to 2,867 yuan ($380). Chinese cabbage was 0.02 yuan apiece, but is now 2 yuan. Compared to these two indices, Ren said, 16.6-fold increase in the country's housing prices during the same period is negligible.

In fact, China only began to commercialize real estate in 1998. In 1978, most housing was allocated by the government.

It is true that the price of Chinese cabbages has increased 100 fold, it started from a very low price and does not affect people's lives in the same way that housing does. Real estate prices, however, had a high basis as soon as it was commercialized, and any increase will inevitably affect consumer pockets.

By comparing the price of housing to the price of cabbages, Ren is only creating confusion, and reaping huge profits for developers.

This not only shows a lack of conscience during this downturn in housing prices, but also a reluctance to let go of profiteering practices by Ren and his ilk. It is an obvious attempt to lure potential homebuyers to pay high prices and to sway policymakers to pass advantageous regulations.

Many consumers, well aware of the profit-seeking motive of real estate developers, have chosen not to buy houses to protest the high prices. Government authorities have also called on developers to lower housing prices.

Given the current predicament of the real estate market, developers should voluntarily lower housing prices to more affordable levels.

Only by doing this, can China's real estate market pull out of the downturn. Ren and his colleagues should know that remarks such as his will only reinforce the already compromised image that people have of developers, and that it will be detrimental to the healthy and steady development of the real estate sector.

China.com.cn

(China Daily 04/27/2009 page2)