Govt has little leverage in property market
- Source: Global Times
- [02:27 December 16 2009]
- Comments
But local governments, which rely heavily on sale of land to raise revenue, have little motivation to build cheap housing. It is obvious that increased supply of affordable housing is unlikely to materialize unless the central government enhances fiscal support to those schemes.
The tax burden on purchase and maintenance of property is much lower than on other investments such as manufacturing. The matter of levying property tax is still at the discussion stage. The 5 percent tax levied on rental income is minimal, which makes housing a profitable investment option.
The escalating prices have further stoked people's desire to acquire an apartment in a country where owning a house is a dream chased by everyone. When college graduates join the apartment-hunting trip, there is little hope of the market returning to rational levels any time soon.
The property market is now a playground for diverse interest groups from local authorities and the central government to all classes of people, besides speculative investors and needy buyers.
Excessive deregulation of the housing market in the past decade has led to the present chaotic situation. Housing is not an ordinary commodity. It is impossible to rely on the market for meeting everybody's demand of a place to live in.
Regulation of the housing market would be a long-drawn process, which calls for consistency of policy, strong supervision, and reining in irrational play.
