2011-03-29 14:30

The hesitation by many local officials to announce their 2011 targets for property-price control does not bode well for the Chinese government's efforts to cool the real estate market.

Worse, those few cities that have released property-price caps have seemingly come up with a sort of excuse for more hikes in local property prices.

With just a week to go before the deadline, it was reported that nearly 95 percent of cities and regions in China have still not released their 2011 targets for controlling house prices.

However, among those that have released their targets, several have set a target of a 10 to 15 percent price increase over the previous year for 2011, while others have linked their price targets with the average increase of urban per capita disposable income and the growth of local gross domestic product (GDP).

Given that China's urban income level increased by 11.3 percent last year and GDP by 10.3 percent, those announced targets mean practically no Chinese city is planning to limit its housing price growth to a low single-digit level, never mind reducing property prices.

What a disappointment to the Chinese authorities who are eager to prevent a dangerous property bubble, especially now the country is battling inflation.

If the country allows local property prices to continue to rise, it is more than likely that not only the real estate sector but also the national economy will soon become too overheated to avoid a hard landing.

Latest statistics show that home prices in most major Chinese cities continued to rise in February despite government efforts to cool the property market.

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Clearly, after so many rounds of "tough measures" have failed to rein in property prices, the government can no longer afford to let the current efforts fail.

However, the double-digit targets for property-price control have laid bare both local governments' reliance on a property boom for revenues and local officials' insensitivity to the risk of property bubbles.

Yet the real problem with the property market is not the property-price targets.

To curb the rapid rise in property prices, the central government must assume its responsibility of turning off the tap of excessive liquidity.

Local officials may defend their ostensibly irrational property-price control targets by arguing they can do little about the rising tide of overall economic growth that tends to lift all boats.

But the answer to this is not to decide what is a reasonable price target. Instead, the central government should hold local governments to their obligation to build enough affordable housing.

After all, it is the supply of houses and the purchasing power of home buyers that determine the property market.

Chinese policymakers should aim at the right target, which is to build more low-income housing.