OPINION> FROM THE CHINESE PRESS
How much does a house cost?
(China Daily)
Updated: 2009-06-11 07:54

There is no way to decide on reasonable prices of housing unless we know the actual cost of housing projects, says an article in Chinese Business View. Excerpts:

The National Bureau of Statistics (NBS) will soon conduct a special study of housing development costs in 40 key cities, including the basic terms of the builders, their financial condition, number of projects underway and composition of their building costs.

The study aims to find out the reason for the prevalent high prices of houses. Some observers expect the central government to map out a new policy for the real estate industry, and the new moves may affect housing prices.

The common people's perception is that the real estate business thrives on exorbitant profits, and no other sector can produce as many wealthy men as real estate. People blame builders for the exceedingly high housing prices in cities across China and have attempted to make them disclose the real cost of construction. But, until now, few have succeeded in knowing the actual cost.

As Ren Zhiqiang, the Beijing-based real estate mogul, said disclosing costs of home building is akin to making public one's wife's vital statistics. Other home developers believe that building costs are a trade secret and, therefore, not forthcoming on this topic. As a result, people have no way of judging whether the sale price set by home developers is reasonable or not.

Without a grasp of the real costs of building houses, policy-makers cannot gather insights on the state of affairs in the real estate industry at this time of financial crisis. Nor can they determine the effect of the earlier stimulus policies aimed at the real estate industry.

It is commendable that the NBS has decided to remove the shroud over building costs for the benefit of the public. But this is not enough. Private sector companies should also be encouraged to carry out similar studies of the market and the industry. Third party studies, independent of both government and the real estate industry, may be more reliable.

(China Daily 06/11/2009 page8)