GDP, house prices frame China's property policies

BEIJING - China's future property policies must strike a tough balance between the decelerated growth of the Gross Domestic Product (GDP) and the rise in home prices, noted economist Ba Shusong has said.

In a lengthy article run by Shanghai Securities News on Thursday, Ba said there would be increasing difficulties for policymakers in the property industry and the effect of policy would be harder to predict.

Ba is a senior analyst with the Development Research Center of the State Council, an influential government think-tank.

"The property industry is the supporting force for economic growth and economic structural reforms, and the fact has not changed," he said.

The "floor logic" in economic growth among policymakers means that property policies in the near future would still depend on economic growth rates, he said.

Months ago, Chinese Premier Li Keqiang told provincial governors that policies must keep economic growth above a "floor," which Ba estimated at 7.5 percent for 2013.

The main purpose of maintaining growth is to provide enough jobs, which is vital for social stability in China.

According to Ba, if the growth rate were to fall below the growth floor, the government would probably respond with weaker enforcement of existing policies and a delay in rolling out new policies for the property industry.

The volume of home sales nationwide is still a leading indicator to signal the need for change in macro policies, Ba said, adding that the timing of the introduction of a real estate tax will also partly depend on economic growth.

According to Ba, the government-set house price targets and the system of accountability for local officials mean that there would be no quick exit for government intervention in the property market.

Ba maintained that the core problem of the Chinese property market has shifted from the shortage of houses to the imbalance of ownership.

He said China's long-term house supply system should consist of three parts. For low-income families and the floating population, a government-subsidized low-rent housing system should be put into place.

For middle-income families, or the so-called "sandwich class," the government should use the tools of tax and finance to help them buy their own homes.

As for high-income families, the government could employ a real estate tax to suppress their purchases and demand in an appropriate manner, Ba said.

Driven by rapid urbanization and huge demand, China's house prices have spun out of control in recent years and become a major headache for the authorities as more people are priced out of the market.

In October of this year, China's house prices continued to rise.

According to data released by the National Bureau of Statistics, of a statistical pool of 70 major Chinese cities, 65 saw month-on-month rises in new home prices in October, and 62 reported price gains in new and second-hand homes.

In response to growing public complaints, the central government and cities with heated property markets have tried to rein in prices by creating purchase restrictions and experimenting with property taxes, resulting in a short-lived cooling of the market. However, after a while, prices have rebounded to new highs.