An opinion piece just published by the Xinhua News Agency calls for doubling down on reforms designed to head off speculative investment in China’s housing sector, despite conceding that they’ve caused considerable market distortions.
While the Chinese government has launched a bevy of measures to contain overheating urban real estate markets, the opinion piece entitled “The Prevention of Housing Speculation Requires the Deepening of Reform” (防炒房须深化改革) points out that the crackdown may in fact be driving property investment by distorting the market.
“Under the control of purchase restrictions, sales restrictions, price restriction, lending restrictions and other policies, certain places have seen prices for new and pre-owned homes become up-ended, triggering a rush to purchase new homes.”
According to Xinhua, however, the solution to this problem does not lie in the dialling down of these policies, but instead stepping them up.
“The appearance of this phenomena is not because real-estate market controls are too severe, but precisely because controls aren’t comprehensive enough, and reforms have not been depend enough.
“At present real-estate market controls are entering ‘deep waters,’ and the difficulty of implementing controls is expanding. The greater the market concerns, the greater the need to stabilise expectations – the greater madness on the market, the greater the need to deepen reform.
The opinion piece points out that property market adjustments by the government would ideally involving short-term control policies creating a window of opportunity for longer term reforms.
A key policy for the reform of China’s housing sector is expansion of the urban home rental market.
“With the view that houses are for occupation, [we should] establish long-term mechanisms to gradually expand land supply for public rental housing, and focus on meeting housing demand from migrant workers, newly employed university students and other disadvantaged urban groups, to further reduce the gap between rich and poor and expedite balancing of supply and demand on the real-estate market.”
The Xinhua opinion piece also points the need to advance financial reforms to divert speculative investment away from the housing market.
“[We should] effectively expand capital markets, increase the supply of high-quality investment products and expand investment channels, guiding funds away from the real estate market towards other markets.
“Reduce the investment returns from the real estate sector, with respect to financing stifle the open routes and covert channels for speculative investment in housing, and direct investment towards the real economy, transferring it to industrial development that is urgent need of support.”