Govt has little leverage in property market

• Source: Global Times
• [02:27 December 16 2009]
• Comments

When property developers openly speak of the bubble in the real estate market growing to dangerous proportions, the actual situation may be worse as developers have made record sales – and profit – in this boom year.

The soaring price of property has become a serious national issue and the economic distortions it gives rise to is affecting the everyday life of the majority.

The message from Monday's State Council meeting that the central government would check excesses in the real estate market next year has not raised much hope of remedial action, since the government has little leverage in the matter.

The Central Economic Working Conference held earlier this month decided that the expansive fiscal policy would be continued in 2010.

Maintaining the growth rate and creating more jobs to keep social stability requires large-scale fiscal support to be continued.

But exuberant liquidity will flow to equity and property markets for higher returns, and this bodes ill for the government's housing market regulatory plan.

Monday's meeting revealed few details of how the government intends to tame the runaway property market. However, it outlined a plan to improve housing for 15.4 million poor families by launching more affordable housing schemes.

Even low-cost housing may not help much in bringing down the property price. Housing prices are high because of the large number of investors and speculators.

Affordable housing is, perhaps, the only way for the poor to get a place for living. In cities with high living expenditure, government needs to make special efforts to expand the availability of affordable housing.