Housing still on unsustainable path

By Mark Williams ( China Daily ) Updated: 2013-02-28 07:37:07

The deceleration in China's economy last year was mainly because of a slowdown in property construction that was triggered by a tightening of policy controls on the sector. Developers deferred new construction projects and slowed or stalled many that were already underway. China's property sector is big enough to have repercussions around the world as orders for iron ore, copper and construction equipment dried up. But it was China's economy that bore the brunt of the impact. Last year's GDP growth was the weakest in more than a decade, according to official figures, and roughly two-thirds of the slowdown from the year before was directly due to the weakness in property.

So has the time come for the government to start thinking of relaxing its property market controls? And if now is not the moment for them to be relaxed, how long should we expect the controls to remain in place?

Relaxation of the controls, the most important of which are limits on purchases and on lending to developers and homebuyers, would be widely welcomed. Developers would benefit most but, as they restart projects in anticipation of a pick-up in sales, the gains would spread, including to the rest of the world. China's local governments would also be big winners. For many of them, the sale of land for housing development is a key source of revenue.

Housing still on unsustainable path

Most Popular