2011-03-02 14:24

Premier Wen Jiabao's pledge to tame the country's runaway housing prices is not new. But his latest announcement that the government will work to build 36 million affordable homes in five years has made that promise more credible than ever.

We hope all local governments that have failed to meet their affordable housing construction targets in previous years will do their utmost to fulfill this goal.

If so many affordable apartments can be built in time, it is more than likely that the housing pressure on poor families will be significantly relieved and that China will manage to avoid a devastating property bubble.

China's property prices have been climbing steeply since June 2009, fueled by record bank lending and tax breaks.

A year ago, the central government adopted a range of tightening measures - branded the most draconian property market measures in history - to cool the red-hot housing market, mostly from the demand side.

Those measures, including higher down payments and lending rates, purchase limits and a promise to increase housing supplies, have achieved some initial results in discouraging speculation.

Nevertheless, house prices are still rising, with prices of new properties in 68 of 70 major cities in January up on a year earlier. And 10 of the 70 surveyed cities even reported double-digit increases in new home prices.

The reasons behind the seemingly unstoppable rise in China's property prices are complicated and include the fast urbanization that the country is undergoing and local governments' increasing dependence on land sales for revenue.

Yet, the domestic complaints about soaring home prices and the dire consequences resulting from the burst property bubbles in many other countries show that it is essential that Chinese policymakers keep house prices at a reasonable level.

After trying out so many demand-side measures that have barely managed to cool the property market, it is time to take a hard look at the other side of the equation. Can the supply of affordable homes be dramatically increased to meet the housing needs of the numerous middle and low-income families?

Constructing 36 million affordable homes in five years - 20 percent of the country's current total in urban housing - will not be easy. The first step is to ensure 10 million such subsidized apartments will be built in 2011, almost twice as many as last year's target of 5.8 million.

The central government has called for local governments to increase funding and land supplies for affordable housing projects, making it a mandatory task that must be fulfilled this year.

However, two months have already passed as detailed supporting policies, such as funding and land supply policies, are discussed.

All these problems will not sort themselves out any time soon. But Chinese policymakers can give the property market a clear signal by explicitly throwing their weight behind the new housing mandate.