Economy
Booming real estate sector puts China at crossroads
(Xinhua)
Updated: 2010-03-01 22:12
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BEIJING - For China, from ordinary citizens to top policy makers, the phrase "real estate" brings a mixture of feelings. Strong investment in the sector has helped China recover quickly from the global financial crisis, but has also complicated China's economic future.
In the past year, investment has contributed eight percent to the nation's economic growth, compared with 4.6 percent from consumption and negative growth of 3.9 percent from exports, official data showed.
Fueled by a record bank lending and favorable tax breaks, home prices have surged since June last year, going beyond many people's reach and spurring fears of a bubble.
In an online survey about "the most important issues" to be discussed at the upcoming annual legislative, advisory sessions conducted by Xinhuanet.com, the web site run by Xinhua News Agency, 26,415 votes, or 69.8 percent went to housing prices as of 5 p.m. Sunday.
In the first eleven months of 2009, China's average home prices reached 4600 yuan (about 673.5 USdollars) per square meter, up 27.8 percent from the same period in 2008.
"With such crazy conditions, owning a house can change your life. You can lose the one you love, or win her over but only to become a mortgage slave," said Zhou Jiantao, a white-collar worker in Shanghai.
Searching for a new flat for himself and his fiancee for more than a half year, he has become dismayed by the skyrocketing home prices in the city.
A popular TV drama called "Dwelling Narrowness" has gained much popularity in China, depicting modern-day young people struggling with the problem of high housing prices.
Even Premier Wen Jiabao mentioned the show during his an online chat with netizens Saturday.
Wen said he connected with the characters in "Dwelling Narrowness" as his five-member family once lived in a nine square meters room for quite a long time when he was a child.
"I really understand the complaints as housing prices in some cities have risen too fast," Wen said.
He expressed his determination to "rein in this wild-horse" and keep property prices at a reasonable level during his term as premier.
According to Wen, the government would step up efforts to increase the supply of affordable houses, encourage reasonable house buying while curbing speculative demand, and punish developers that hoard land and completed houses in anticipation of price increases. MORE COURAGE NEEDED
However, there is still a long way to go as China's local governments rely much on commercial housing and land sales, their biggest source of revenue in recent times.
The revenue from land transfers in China's 70 large and medium-sized cities totaled 1.08 trillion yuan (about 158.82 billion US dollars) in 2009, up 140 percent from a year earlier, according to China Index Academy, a real-estate research institute.
"To ask local governments to build more affordable houses and suppress housing price rises is really asking them to cut off their biggest source of revenue, as housing sales account for about 40 to 60 percent of total revenue," says Bao Zonghua, former chief of the Ministry of Housing and Urban-Rural Development's policy research center.
Courage is needed to delink local economic growth from the booming real estate sector, but no matter the bubble has to be stopped sooner or later, said Peng Zhenqiu, Shanghai city counselor who has taken part in research on urban housing.
"For the traditional Chinese people, owning a house or a flat means security, not simply a financial investment," he said.
Peng forecast that deputies and advisors at the upcoming two sessions would put forward good proposals to make housing more affordable in the future.
