China's property speculators are worried as house prices lose their ascendance momentum due to government intervention. It seems impossible to rake in the huge profits of the past years by buying low and selling high. Some jittery speculators are no longer thinking about how much profit they can make, but are intent on selling off the properties still in their hands without losing money. However, even this goal seems elusive.

The phrase "property speculation" appeared only about two decades ago, as a product of the commercialization of urban property in China. It began to create a society eager to make money without having to work hard, and sowed bubbles of risk. Since the founding of the People's Republic of China (PRC) in 1949, the Chinese Government has been sending the message that houses are shelters, not commodities.

"Houses are built to be lived in, not for speculation," President Xi Jinping said at a meeting of the Central Leading Group for Finance and Economic Affairs in 2017, which became the guiding principle for China's real estate market adjustment.

To have a house to live in is an important part of ordinary Chinese people's dreams. In the Chinese tradition, a decent residence means a good life. In the early days of the PRC, houses in the country were severely damaged after a century of wars, and in the cities, there was an acute shortage of houses.

Residents were dependent on government allocation of houses. In 1950, China's house stock in cities stood at just 400 million square meters. With 61.7 million city dwellers, the per-capita home size was only 5.5 square meters.

Under the planned economy, almost every organization or enterprise ran their own school, hospital and other public utilities and provided free housing to employees. Housing allocation was a major form of having access to houses in cities.

But while China's population surged, urban accommodations remained almost at the same level. In 1978, the year China began to adopt its reform and opening-up policy, urban per-capita living space was only 3.6 square meters, smaller than in 1950. The major reason was that house construction was mainly financed by the state. Huge financial pressures hampered the pace of house building, leading to a gap between the growing population and the existing house supply.

In June 1980, the government introduced a new housing system under which the government, enterprises and workers each bore one third of the expenses of building apartments. In 1988, the government formally included the reform of the welfare-style housing system in the overall planning of reform and opening up,

suggesting that houses as personal consuming goods could be traded as private property. Private real estate developers emerged during this period, while house supplies began to grow.

After 1998, the marketization of housing began in earnest. The Asian financial crisis in 1997 offered an accidental chance for the reform of China's housing system. The government sought to cope with the financial crisis by expanding domestic demand and real estate was regarded as a new engine of economic growth. On July 3, 1998, the State Council, China's cabinet, issued a regulation asking organizations to stop allocating accommodation to their employees, marking the start of a new marketization era of the housing system.

In the following two decades or so, the property market continued to balloon, with property investment growing at a two-digit rate. A prospering property sector changed the urban landscape. In 2018, urban residents' per-capita housing space was 39 square meters, more than seven times the area 70 years ago.

In retrospect, the major task of the property sector has always been to provide people with enough houses. It was the case under the planned economy system and is the same under the market economy system. While high-income earners can buy houses on the property market by paying high prices, the government is building low-rent and low-cost housing to ensure that families with low income also have a place to live in.

One downside of the property frenzy that China has experienced in the past two decades is that houses are being used as commodities for speculation, giving birth to a new occupation—property speculators. House speculation is permissible in mature real estate markets in developed countries, but not in China. Heated house prices will put the financial system and even the whole economic system at a huge risk. After all, the lesson from the subprime mortgage crisis in the U.S., which triggered the 2008 financial turmoil, is still fresh in people's minds.

Even without inflating prices, China's property market has huge potential. Every year, millions of students graduate from college, a large number of the rural population heads for the cities and a lot of house owners upgrade to better houses. So there exists a real and tangible demand for houses. Therefore China's property prices must be kept stable. The fact that houses are in essence shelters for people means that Chinese society must say no to property speculators.

Copyedited by Sudeshna Sarkar

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