Editorials

One home, one dream

(China Daily)
Updated: 2010-10-09 07:23

The new rule that Shanghai announced on Thursday, to allow local families to purchase only one new home each for the time being, at a first glance, bears little resemblance to adroit policymaking.

Such a blanket restriction seems neither an effective measure to cool surging property prices nor fair to buyers. Beijing imposed a similar restriction in April but few consumers have noticed it, as local house prices remain prohibitive to most.

However, in spite of the apparent clumsiness of such policies, the introduction of a one-home-per-family restriction might be more needed than it appears given the country's ambition and urgent embrace of consumer-led growth.

As in many other countries, the rapid development of the property sector has served as a key growth engine for China in recent years. Yet, unlike those advanced economies which are set to suffer for years from their recent property price crashes, China has witnessed a quick rebound in house prices since 2009. A surge that was too strong to assuage concerns about property bubbles.

The country's fast urbanization, as well as the rapid rises in wages, have prompted arguments trying to justify the soaring prices, which are exorbitantly high in terms of both the price-to-income ratio and the price-to-rent ratio.

Fortunately, the Chinese government does not buy these arguments, though many local officials are still reluctant to temper house prices, a move that would undermine their efforts to raise revenues for local governments from land sales.

In April, the central government adopted the most draconian measures in history to cool the property market. But it will take time for those measures to bear fruit. Statistics show that in August house prices in 70 major Chinese cities rose 9.3 percent on the year before.

Strictly implemented, the new regulation may curb speculative property purchases that have helped drive prices beyond the reach of most families.

But more importantly, if Chinese urban families are persuaded to stop buying more apartments, as a way to gain higher returns on their savings than deposit interest rates, the country will have a better chance of stimulating domestic consumption.

Unchecked property price hikes will only deprive most Chinese families of their dream of home ownership and further expand the wealth gap between the few who can afford more than one home and the many who cannot.

If China is to effectively pursue inclusive and consumer-led growth, a supposed priority for the coming 12th Five-Year Plan period (2011- 2015), policymakers must not allow the property market to remain in favor of the haves over the have-nots.

In this sense, the one-home-per-family restriction is a necessary first step. But more efforts need to be done to tame the overheating property market for the long-term well-being of the economy and the people.

China Daily

(China Daily 10/09/2010 page5)