Curb speculation to cool house prices

ACCORDING TO THE NATIONAL BUREAU OF STATISTICS, China’s real estate market continued to show signs of cooling last month, as home prices in major cities fell or experienced slower growth. Beijing Youth Daily commented on Wednesday:

The growth of home prices in 15 first- and secondtier cities cooled in August, thanks to a combination of measures taken to curb speculation over the past year. On a month-on-month basis, they fell or remained flat in 13 cities in August, a novelty in the Chinese real estate market for many months.

That, however, may not necessarily herald a turning point despite the consistency of efforts to rein in property prices. The meager decline in new home prices in some cities is not enough to support the prediction that house prices will fall in the coming months.

The ever-changing market factors and local government real estate policies make it almost impossible to put to rest all the uncertainties or keep the slightest turbulence in check. The new home prices on the month-on-month basis could get a shot in the arm, for example, when a few high-end and costly residences go on sale. Besides, what happened to the 15 cities’ real estate sector does not speak for other cities across the country, since the average growth rate in some cities remained above 10 percent in August.

There is hope that the positive trend will be sustained as long as further speculation is kept at bay. The overheated property market over the past two years was, to some extent, a result of policy disorientation. Some local governments had grown used to the economic benefits of booming property business while turning a blind eye to speculative investments made at the cost of homebuyers. But the financial risks of a growing real estate bubble and the extra debt burden that many households had to shoulder ultimately became too grave to ignore.

More efforts are needed to sustain the restrictions and deleveraging practice, as well as diversify the sources of local revenue.