Higher incomes lead to surging home prices

11:08, April 30, 2011      

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Rising household incomes in China are contributing to the surge in housing prices, in addition to loose credit policies and the practice of local governments' fund raising through selling land, People's Daily reported Friday, quoting scholars.

Higher incomes gave residents stronger investment power, and real estate investments are a traditional choice among relatively well-off residents. But speculation resulted in prices exceed the value of the property, Professors Zeng Kangling and Lv Huirong of Southwestern University of Finance and Economics wrote in the comment published in the newspaper.

The scholars said accelerating construction of affordable housing construction will solve the residents' housing issue and also create a housing consumption pattern fitting the country's fundamentals.

The fiscal budgets of many local governments now largely rely on the land transfer fees that also boost housing prices. Because the economy was driven by foreign investments for a long period, local governments were eager to offer property to industries at low prices or for free. Residential housing lands are sold though bidding and compensate the loss in industrial lands deals, the scholars said.

Restraining skyrocketing housing price is all about changing the mode of economic development, city urbanization and industry development, according to the report. The trend of surging housing prices will not change unless there are changes to the country's industrial expansion mode of economic development and to the evaluation mechanism for local government officials, the scholars said.

Source: China Daily
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