Housing problem worse than US
It could stoke public discontent, warns a central bank adviser
(BEIJING) China's housing market problems are worse than those in the US before the global downturn as they could stoke public discontent, warned a central bank adviser.
The comments were made before China's State Council, or cabinet, announced that it would 'gradually reform the real estate tax' - the first official sign of a possible annual levy on residential housing aimed at reining in soaring prices.
'The housing market problem in China is actually much, much more fundamental, much bigger than the housing market problem in the US and UK before your financial crisis,' said Li Daokui, a member of the bank's monetary policy committee. 'It is more than (just) a bubble problem,' he told the Financial Times in an interview published yesterday.
The property market in the US collapsed as too many people were unable to repay their high-risk, or sub-prime mortgages, leading to a credit crunch in which thousands lost their homes and lending dried up. China has recently introduced a range of measures to prevent the growth of asset bubbles and soaring property prices.
The latest tax plan was expected to discourage property speculation and help replenish the coffers of local governments, which have been severely depleted by an investment binge over the past year, Chinese media reports have said.
Mr Li said that recent government measures to rein in the property market needed to be part of a long-term push to bring high housing prices under control, the Financial Times reported.
He warned that the high cost of housing could hamper future growth by slowing urbanisation. Rising prices were also a potential political flashpoint, especially among younger people who felt locked out of having their own home.
'When prices go up, many people, especially young people, become very anxious,' he said. 'It is a social problem.'
He added that there were still signs that the economy was overheating and recommended modest increases in deposit interest rates and the value of the Chinese currency, the report said.
Authorities have tightened restrictions on advance sales of new property developments, introduced new curbs on loans for third home purchases, and raised minimum downpayments for second homes.
Official data showed that real estate prices in 70 cities jumped 12.8 per cent in April, the fastest year-on-year rise for a single month in five years. -- AFP
Copyright © 2010 Singapore Press Holdings Ltd. All rights reserved.
Stacking it higher: Li Daokui, a member of the bank's monetary policy committee, says that recent measures to rein in the property market needs to be part of a long-term push to bring high housing prices under control
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