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Cover Story Series> Business
UPDATED: August 20, 2012 NO. 34 AUGUST 23, 2012
Curb Property Prices

Despite strict macro-control measures, property prices in some cities are still on the rise. The stubborn trend has gone against expectations and unnerved both the public and the Central Government. The State Council sent out 16 inspection teams to the cities with the biggest price upturns, checking whether housing policies were being followed and investigating the real estate market to help the Central Government form more targeted macro-level controls. The Central Government has a clear-cut stance, which is to prevent the reckless rise of property prices in the future and ensure sound economic development.

In previous years, overheated real estate investment and soaring property prices have imposed an adverse impact on the Chinese economy. The Central Government made several attempts to curb property prices, such as restricting speculative home purchases in order to keep property prices at a reasonable level. The latest round of real estate controls began in 2010, with home purchasing limits established in 50 cities.

The strict approach to price control worked, leading home sales to drop and stabilizing property prices. In the second half of 2011, property prices in some cities even dropped. However, the trend shifted again during the second quarter this year, when land prices in major surveyed cities saw a quarterly rise. In June, prices of newly built homes went up over the previous month. The market expected a strong upturn of property prices once again.

Macro control of the real estate market involves interests of various parties. Local governments, real estate developers and home owners hope to see property prices continue to rise, but the Central Government and potential home buyers wish for a decline. If out-of-control housing prices rise to a point where average people are unable to afford homes, the macro-control policies would cease to be effective and the sound economic development of China would be under threat.

In this game, local governments play the leading role. Seizing on the Central Government's decision to ease monetary policy to stabilize economic growth, some local governments have attempted to relax the real estate control policies, and speculative home buyers are looking to enter back into the market.

Stimulating economic growth by relaxing real estate control is like drinking poison to quench thirst. We hope the Central Government will step in to firmly stop any relaxation or covert act of easing macro control of the real estate market. It should accelerate the establishment and improvement of long-term mechanisms and policies for real estate control, determine to further various control measures and prevent upturns of property prices.

Local governments should shift their focus to accelerating the transformation of the economic growth pattern, and make the economy less dependent on the real estate industry by developing emerging industries and the service industry.

As for real estate developers, it is hoped that they can readjust their product structure and actively participate in the construction of low-income housing.

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