Put houses in order

Though the decline of housing prices in Shenzhen from last year's peak has sparked fears of a momentous housing slump, the national statistics depicted a much less dim picture about the property market.

Second-quarter housing prices in 70 large and medium-sized cities rose 9.2 percent year-on-year, according to the National Development and Reform Commission and the National Bureau of Statistics.

This house price rise was indeed 1.8 percentage points less than in the first quarter, confirming that the real estate sector is under increasing pressure of credit squeeze and consumers' wait-and-see sentiment. But the nearly double-digit rise of average house prices year on year across the country indicates that the market is far from a cause for panic.

Some people have urged the central bank to loosen credit control, warning that sharply falling house prices will give rise to bad loans on commercial banks' balance sheet as more property developers and house-buyers fail to pay their loans.

The new national house price statistics clearly do not justify an immediate shift in the country's tighten monetary policy which is crucial to China's fight against soaring inflation.

Yet, the fact that there is no need for action to boost house prices does not mean policymakers have nothing to do with the housing market.

Instead, while largely leaving the section of housing market for middle and high-income groups alone, the government has a huge task to fulfill in building badly-needed low-rent and affordable houses for the urban poor and low-income people.

One of the key reasons why the public got angry about rocketing prices for commercially-built residential houses is that local governments have long dragged foot on providing low-rent or affordable houses to meet the housing demand of many low and middle-income families.

The central government promised early this year to increase allocation in its 2008 budget by one third to 6.8 billion yuan ($10 million) to build low-rent houses for the urban poor.

It was reported that related departments recently issued a work plan for construction of low-rent houses to urge local efforts in this regard.

The current slowdown of the commercial segment of the property market may affect the country's economic growth. But if local governments can discharge their duty on time to meet the urban poor's need of shelter, the structure of the real estate market will be significantly improved to serve as a long-term pillar industry for the Chinese economy.

(China Daily 07/23/2008 page8)