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Editorials

Pin the housing bubble

(China Daily)
Updated: 2009-12-16 07:46

Chinese policymakers must move faster to arrest the excessive rise in housing prices lest asset bubbles compromise the country's chances of sustaining its economic recovery.

The State Council said on Monday that the government was considering measures and policies to cool down soaring house prices in some cities. The announcement is a sharp departure from the government's previous favorable policies to encourage the growth of the property market with tax breaks and cuts in interest rates.

As a key source of investment growth, the unexpected boom in the housing market has undoubtedly played a crucial role in helping lift the national economy out of the worst global recession in decades. While the housing markets in some major developed economies were still suffering bitterly from the dire consequences of bursting bubbles, China's housing sector returned to positive growth on a month-on-month basis in March this year thanks to record lending and policy support boosting property-related investment.

If there is anything more spectacular than the amazing V-shaped recovery of the Chinese economy this year, it must be the jump in its housing prices which, after dipping for a while, are breaking records in many cities.

Pin the housing bubble

Statistics show that real estate prices in the country's 70 major cities rose by an average 5.7 percent year-on-year last month, the fastest pace since July 2008. Such an increase in housing prices on a national scale may itself be hard to believe in a year full of economic difficulties. But it is actually nothing compared with the dramatic surge in housing prices in several major cities. It has been reported that prices for commercially built new residential units in Beijing, Shanghai and Shenzhen have jumped above 50 percent so far this year, outpacing the growth of local economies by more than 5 times.

The executive meeting of the State Council affirmed that as the market recovers, housing prices in some cities are soaring too fast, which deserves "great attention".

The central government is full aware of the danger of a property bubble that can either continue to expand to inflate the national economy or go bust to derail the ongoing economic recovery.

Hence, it is necessary for the government to expedite and expand construction of housing projects for low-income families, especially as soaring prices have made commercially built residential units more expensive than ever for most people. It is also necessary for the government to do so because its efforts to improve the living conditions of poor families have long fallen behind schedule.

The policymakers have to race against time to provide affordable houses for a huge number of low-income families if they want to prevent the housing bubble from ballooning further and hurting the overall economy.

The executive meeting promised to expedite construction of housing projects for low-income families, aiming to help 15.4 million more poor households solve their housing problems by 2012.

(China Daily 12/16/2009 page8)