You Nuo

Build more homes to solve woes

By You Nuo (China Daily)
Updated: 2010-04-06 08:05

I am afraid, as many others may be, that the government's guidance on the real estate market (especially that in the so-called first tier cities like Beijing and Shanghai), is a classic failure.

Last week, the Chinese-language press reported that in Beijing, the price of new homes exceeded 30,000 yuan per square meter outside the city's Fourth Ring Road, and was edging toward 20,000 yuan outside the distant Fifth Ring Road to the eastern part of the town, where the financial district is located. Calling that crazy, as the city's residents always do, is like a euphemism now, considering that in February, there were still some units marked below 35,000 yuan on the Third Ring Road.

The per square meter price going up 5,000 yuan in a month is reportedly not news any more, as property developers are all claiming that they haven't been able to build as many homes from last year, implicitly as a result of increasing government intervention.

There do seem to be more government attempts, at both the central and local levels, to somehow hold back skyrocketing housing prices in large coastal cities that the whole nation is complaining about.

But the lack of coordination, and indeed that of any strategic coherence, has become a source of uncertainty in the market, which cannot in effect help stabilize prices.

In fact, all sorts of intervention, those already in place but not doing their job and those rumored as to be introduced at some indefinite point in time, are lending a perfect pretext to the developers to withhold units from sale, and to mislead customers or investors (as buyers of expensive houses often are) in one way or another.

A casual look at where Beijing's housing prices are rising the fastest may already reveal a secret. It's the city's eastern suburbs already connected with the financial district with one subway line, while a second subway line is under construction. Even small towns in Beijing's eastern neighborhood are offering housing prices way above similar towns in other places.

Beijing is the capital city of the country not just in the political sense. And the financial district of Beijing is the whole economy's reservoir of money and money-making ideas. All managerial talent, and those providing services to them, are naturally attracted to this city and its unpleasantly crowded, and hopelessly jammed, central business district, because this is where they find their careers.

The same is true of all the coastal cities, being various manufacturing and trade, education and research, and service centers of the country. They are where the young people can see the world and can hop from one job to another until they settle down with a long-term position. It is unrealistic to think they will all be scared away, as some perhaps are, by the formidable housing prices.

So for those cities, the most important thing to do to build homes for the influx of young workers, and to keep them there, is not to police prices and regulate demand, as the government's focus now seems.

Rather, enlarging supply is the key, such as building well connected and hopefully more convenient satellite towns for the existing coastal cities, so that they can hold more people and generate more jobs. That cannot be done by separate and essentially mutually competitive efforts introduced by individual cities, and can only be done under an overall program and guidance. Unfortunately, the kind of service that the central government is yet to provide is precisely this.

yuonuo@chinadaily.com.cn