The central government may have cooled off the real estate market with its new policies for the time being, but more must be done to gain the cooperation of local governments.
The recent plunge in property trading volume in some major Chinese cities has persuaded many homebuyers to take a wait-and-see attitude. That's a good sign for now but it's very important to relieve consumer panic that has been a driving force behind unchecked gains in housing prices.
It doesn't help that the May Day Holiday could possibly fuel more panic when property developers seize on the chance to overwhelm potential homebuyers with aggressive advertisements. If policymakers want to successfully tether the housing bubbles, they must continue to roll out measures that clamp down on China's housing prices and that starts with recruiting the help of local authorities.
After the State Council issued 10 guidelines in mid-April, local governments and authorities were supposed to come up with detailed policies and measures to enforce the latest campaign against property bubbles. Unfortunately, the campaign has so far failed to create fundamental change in the outlook on home prices.
The housing department's recent emphasis on the mismanagement of affordable homes also looks like sort of smoke-and-mirrors job. The current campaign is about the property market, not the government's unfulfilled obligation to provide affordable housing for the poor. Moreover, the procrastination by local governments to implement the central authorities' guidelines have fueled skepticism among potential homebuyers about whether or not the latest campaign to curb property bubbles will work.
As property developers intensify their ads to woo consumers, no one should expect potential homebuyers to hesitate from buying for a long time. To preempt another surge in home prices, policymakers should promptly adopt more credible tightening measures that can weigh strongly with the majority of the masses.
(China Daily 05/03/2010 page4)