Providing cheap homes is the key

A woman talks with a salesman at a property market fair in Hangzhou, Zhejiang province.[Photo/China Daily]

What is strange is the fact that most of the 50 cities have taken measures to prevent speculation in the realty market but at the same time the revenue from land sales jumped by more than 50 percent. This indicates that developers still expect higher housing prices in the near future, which fly in the face of what many local governments have done to control the too rapid rise in home prices. Many of them still have confidence that home prices will still rise despite the policies introduced by local governments.

The developers have ample money in hand, as they are given large loans by domestic banks, which means they can purchase land at much higher prices than last year. They are not afraid of the stagnation of the housing market, which will make it impossible for them to repay their loans since even if they cannot sell the houses they have built, the risk will not be theirs but the banks'.

Against this backdrop, it seems that the policy to set conditions for home purchases and getting loans is far from enough to stop the house prices from soaring, let alone allowing low-income earners to have a home to live in.

What local governments need to do is to spend the money from land sales on building low-rent houses or affordable homes, which will hopefully meet the needs of low-income urban residents. When the majority of middle- and low-income families can have low-rent homes or affordable homes to live in, the need for commercial housing will quite possibly reduce, and therefore home prices will not rise that rapidly or possibly drop.