Strong public rental housing program can curb realty prices
Years of rising housing prices have made China’s real estate sector anathema to many young people and a butt of jokes on many online and social media platforms. In response to public appeals to stabilize housing prices, the government has launched many price and transaction control measures. And the latest data show real estate prices have stopped rising in some major cities; in Beijing, for instance, they have even dropped mildly.
No doubt, such administrative measures do yield temporary results. But overall, realty prices in China have surged in the past decade, with those in some major cities increasing more than tenfold. This strong surge in prices has made many doubt the sincerity of policymakers in cooling the real estate market.
So policymakers have to rethink their short-term demand-repressing strategy and find a more effective way to stabilize the real estate market. Perhaps, as last year’s tone-setting Central Economic Work Conference said, China should put in place a “long-term mechanism” to effectively manage the market. Such a mechanism would include increasing land supply, stabilizing money supply, reforming the real estate tax system, and developing public rental housing.
China has achieved some headway on those fronts. For example, the growth of money supply, measured by M2, dropped to 9.6 percent in May, one of the lowest levels in recent years. The government is also mulling imposing tax on people who own more than one house.
However, China still lacks a sound public rental housing system that can provide accommodation for low-income people who cannot afford high-rental commercial housing.