Experts' views

Learn German lessons

The new real estate policies issued by the central government are mainly targeted at real estate speculators. This has not been recognized by some scholars and developers. They still expect China's asset bubbles not to burst until 2015. The government must impose a heavy tax upon real estate speculation, because the real estate market is different from the stock market. The well-being of China's 1.3 billion people - most of whom are not rich people - is closely related to the real estate market.

The policies that China has used to control real estate market will not have a major impact on real estate speculators, and many famous scholars and economists are actually real estate investors and use their intellectual and commercial power to influence policymaking.

The continual rise of China's real estate prices has a negative influence on China's overall economy and the people's livelihood.

We should draw lessons from Germany, which has had quite stable home price growth through imposing heavy taxes on house speculation. If the Chinese government imposes a heavy tax upon real estate speculation, and ensure speculators cannot profit from the real estate market, then China can solve the problem of uncontrollable home prices.

Tackle social issues

House prices have become a big issue in China. I think it's right for the government to regulate China's real estate market, but I don't think the adjustment should be too drastic, because the current housing price level reflects the country's overall social and economic problems, such as income and regional gaps. So if China simply tries to control real estate prices without being able to solve its overall social and economic problems such as unemployment, the gap between the rich and the poor, monopolies and so on, then the house price problem won't be solved successfully.

Management problems

China's real estate problem doesn't lie in the market, but in the management of the sector. The government is responsible for the current housing price woes. It should improve its real estate policies to satisfy the different demands of different interest groups, such as affordable housing for the poor.

Legislators had found, for example, that local governments had only delivered 26 percent of their promised supply of low-priced affordable housing. The government, therefore, should bear most of the responsibility for the current real estate troubles. Home prices this year won't rise sharply like they did in 2009, they will be quite stable.

Look beyond big cities

The current home prices in China's big cities are too high, but I am not sure whether the prices will drop or not. The current home prices in China's second-tier cities are not very high yet, but if the government policies take effect, then the prices in China's second-tier cities will drop immediately. Meanwhile, prices in China's small cities are still low, and so we can't jump to conclude that China's overall real estate market has a bubble.

Target speculators

We should not underestimate the effect of the new policies targeted at controlling surging home prices. The intention of the policies this time is very clear, gradually adjusting the preferential policies the government previously implemented to support home sales. Last year, due to the fallout from the global financial crisis, the government released a series of preferential policies to stimulate house purchases. This continued in the first quarter of this year. The new moves, however, are targeted at those preferential policies that raise the cost of speculative housing deals.

(China Daily 05/05/2010 page14)