Dizzying house prices

(China Daily)
Updated: 2007-12-15 09:36

New statistics showing a continuous rise in house prices fly in the face of numerous media reports that domestic property prices have already started to decline in some cities.

Policymakers should step up efforts to curb surging house prices now to avoid a later rush for homes in fear of further price hikes.

Housing prices in 70 large- and medium-sized cities rose 10.5 percent year-on-year in November. The rise, 1 percentage point higher than that of October, hit a new high, undermining the government's efforts to stabilize house prices.

As part of its macroeconomic controls to cool economic growth that is bordering on overheating, the government has introduced a host of tightening measures to rein in soaring house prices.

For instance, the banking authorities recently made a strict definition of "second home" according to the property owned by the families of mortgage applicants rather than just the applicant.

The rule will deal a heavy blow to speculative homebuyers as they will have to make a higher down payment and cannot enjoy preferential interest rates. In some cities, it was such speculative house purchases that considerably fuelled runaway property price hikes.

Besides, the government also decided to adopt a tight monetary policy to check credit growth. In the absence of easy access to bank loans, it is believed that some developers may cut prices to promote sales due to liquidity concerns instead of hoarding houses for fatter profits.

Under such circumstances, media reports from across show the country that house sales are shrinking and prices are plunging in cities that once boasted jaw-dropping amounts.

It is surely not difficult for these reports to find an audience. Rocketing house prices in recent years have made home ownership a heavier than ever burden for most potential buyers.

However, the latest house price data has proved it is only too premature to conclude that the property market has reached a turning point. The November figure indicates that the momentum of property price hikes in major cities remains strong.

Only when the government substantially increases the supply of affordable homes for low-income groups and provides more land lots for development can the imbalance of demand and supply in the property market be addressed.

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