In 2010, China rolled out policies restricting home purchases in a bid to dampen prices in the country's real estate market. But with 2013 now upon us, many have voiced concern about the continuation of these policies into a new year.
Generally speaking, there are two ways the government can drive down home prices: bring down construction expenses for property developers or deflate demand in the market.
Land prices have long accounted for the lion's share of builders' expenses. But given that arable land supplies in China have already shrunk to near the 120-million-hectare red line set by the government to ensure that the country's grain supply strategy remains intact, local administrators can hardly reduce land leasing fees by filling the market with new plots. As such, the better strategy for planners to lower home prices is to curb purchases.
But, as many have long lamented, the restrictions currently in place on home purchases have greatly hurt real home buyers rather than speculators stocking up on properties for investment purposes.
At this juncture, the best thing central planners can do to curb home sales without undermining the interests of the country's many under-housed urban residents is to support the rental market.
Chinese people have long preferred to buy homes rather than rent due in part to the emphasis the local culture places on family and security, but conditions in the poorly regulated rental market have also done much to contribute to this preference.
As many as 89.68 percent of Chinese city dwellers have purchased a home, according to a report released by Southwestern University of Finance and Economics in May; while in many developed economies, such the US and France, homeowners account for around 60 percent of the urban population.
As many people who have rented an apartment in urban China can attest, the rental process is rife with opportunities for trouble and is sorely in need of attention from housing authorities.
In China, it's not uncommon to hear stories about unscrupulous brokers gouging renters with unreasonable fees and charges before, during or after a rental agreement is reached.
Without the government there to safeguard tenants' rights and interests, Chinese people have understandably been more inclined to buy. Yet, not everyone in the country has the financial resources to buy a home. To take some of the demand pressure off the real estate market and assure that urban dwellers have adequate accommodations until their can afford to purchase a home, the country needs a stronger rental market.
Meanwhile, the government should impose higher taxes on those who keep investment properties untenanted or who sell them off shortly after purchase. Such a move would create more rental space and keep a lid on short-term speculation.