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People's Daily Online>>Opinion

Return to reason for real estate

By Wu Jiangang (China Daily)

16:35, November 22, 2011

The bubble has done much harm to society but government efforts to curb the hike in house prices appear to be working

There may have been doubts there was a real estate bubble in China a few years ago, but it is obvious now. The average house price has tripled between 2005 and 2009. In some cities like Shanghai and Beijing, house prices increased by more than 40 percent in 2009 alone, and an additional 30 percent in 2010. The prices in both cities are now ridiculously high, while the rent to price ratio is much less than the deposit rate and the average family needs to work decades to afford a small apartment.

A real estate bubble is not only an economic problem, it is also a social disease that can do a great deal of harm and a ticking economic time bomb.

First, it causes unfairness. A rapid increase in house prices means the wealthy and those who were fortunate enough to buy apartments early can accumulate a fortune, while others cannot afford a property any more.

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LovingChina at 2011-11-23183.39.47.*
The article has reasoned well and amicable in terms of government policies thus far to curb speculations but such policies also crimped real estate investments that saw good money flowing out of wealthy Chinese in China to other nationals and nations! So, on a big picture scenario, is this considered good or bad for China? There were 3 main culprits that had caused a scare in Chinese property bubbles: (1) Allowed speculations went unchecked / unchallenged such as foreign investors including those from HK, Macau & Taiwan who typically swang and flung about 3 or more properties in major cities by each investing individual every few months, (2) Unfair land distributions and corruptions among govt officials and (3) Governments were blind and/or reluctant to build more affordable home units for the majority of poorer folks in major towns and cities in that land revenues could fall short of targets. A case of naivety, corrupt practices and carelessness! If those governments & officials could see & sense further ahead honestly, there shall be NO property bubble ever in China due to its sheer size of >1.35 billion people with at least 50% of them still needing a home of their own in any city / town / village; while China still wants property investors to drive the highly priced / valued property market at home else others outside China will be smiling upon Chinese Yuan though not the Chinese, sadly is a fact of life!
Canada at 2011-11-2370.36.49.*
Housing prices here are unaffordable. Prices have doubled or tripled in the past 4-6 years, next to no rental housing is being built, the vacancy rate is very low, & rents are excessively high. It"s good that China is trying to keep housing affordable & curbing the property speculators.
Observer at 2011-11-23203.177.74.*
The manipulation of the real estate market is not a principle of free market enterprise. Prices must be let to rise and fall as the market demands. Fortunes must rise and fall along with them. These are lessons required to understand the freedom of the free market place.

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