Defuse the housing time bomb

It would be difficult to dissipate the public bitterness about rising urban housing prices unless, perhaps, the central government launches an overall guideline consisting of some key principles to meet the basic housing needs of salaried classes.

This will be a national task whether or not the National People's Congress (NPC), the nation's legislature, and the CPPCC, the top advisory body, now in session in Beijing, can come up with such a solution in roughly two weeks' meeting time.

Such a guideline would give China a policy instrument to measure, in the process of its rapid urbanization, its general demand and to regulate the supply of different types of housing and their financial terms.

More importantly, perhaps, China needs a policy instrument to regulate all cities' ambition to seek revenue growth from unbridled auctions of land rights, which in effect ties local governments' financial interests dangerously to high-price housing.

Methods to intervene in the property market, which the central and some local governments have introduced recently in response to concerns over the marked price rises in the second half of 2009, would not become systematic without such an overarching program.

Nor, perhaps, would the methods, individually introduced by different government agencies, work together to produce the expected results.

But if they don't, in a couple of years, people will hear more opinions reflecting public anger and frustration on this issue. And the NPC and CPPCC will have to come to face the same task. This is a situation that Beijing had better avoid.

In fact, this year, many NPC and CPPCC participants could not wait for their meetings to begin to air their views.

It is clear that no issue has been more controversial than the housing prices in the NPC since the beginning of the reform era.

A recent report by the National Bureau of Statistics (NBS), showing that urban housing prices had only increased year-on-year by a mere 1.5 percent in 2009 when overall sales jumped a staggering 80 percent to total more than 3.6 trillion yuan (around $530 billion), was openly called absurd.

It only added fuel to the frustration already existing among the salaried class, who saw housing projects here and there (in some estates in Beijing, for example) even double their prices in a little more than six months.

Social pressure is building up. It is so strong that the NBS director had to respond to the media that there would be improvement in its survey method. Yet, however the survey method may be revised to reflect the realities, and whatever figures one may give about the rise in housing prices, one thing cannot be changed.

If city governments continue to depend single-mindedly on land auctions for local revenue growth, no one will receive due incentives to build more low-price housing for the salaried classes.

As a result, the urban housing market will remain an entirely speculative market, like the stock market. And every city's bubbling property business will be a time bomb ticking under the economy's balanced, harmonious growth.

The author is business editor of China Daily.

(China Daily 03/05/2010 page14)