Property destocking should not rely on encouraging migrant workers to buy homes

By Hu Weijia Source:Global Times Published: 2016-3-29 23:53:01

The local government in Jinzhou, a city in Northeast China's Liaoning Province, recently issued detailed measures to ease the local real estate market's burden of unsold homes, including offering subsidies to migrant workers to buy homes in the city.

Since the beginning of this year, local governments in nearly 100 Chinese cities have introduced policies to encourage rural migrant workers to buy homes, in a bid to speed up the process of destocking in the property sector, according to media reports.

Once a key engine of economic growth, the real estate sector has become a drag on the local economies in some lower-tier Chinese cities because of large inventories of unsold property. It is understandable that local governments are eager to bolster the real estate market to combat downward pressure on the economy, but the idea of encouraging rural migrant workers to buy homes in cities has stirred up a lot of discussion online, with concerns being expressed about the possible side effects of such policies.

It is still difficult for rural migrant workers to be integrated into cities under the current social welfare system, in which non-local residents cannot receive the same welfare benefits as those with a local hukou, or household registration. Taking a close look at the new policies issued by local governments, most of them focus on cutting the cost of home purchases by providing subsidies and loans to rural residents, and only a few of them include improving social welfare and integrating rural migrant workers into the cities. Just offering preferential loans is not enough to encourage rural migrant workers to buy homes in cities. Also, many migrant workers are low-income earners without a stable job in cities, so they would need to borrow a lot of money to buy homes, which would lead to an unsustainable leverage situation.

Another potential problem is that encouraging rich farmers and rural migrant workers to buy homes in cities is likely to aggravate the problem of poverty in China's rural areas. There will be a hidden danger in China's urbanization if money continues to flow out of the countryside and into cities, as it could result in growing economic and social problems in rural areas.

Protecting the interests of rural migrant workers should be a higher priority than boosting the country's real estate sector, and it's important to avoid a buildup of risks amid the destocking drive. In reality, rural migrant workers may be at more risk if they buy properties, because many of them work in industries burdened with overcapacity and it will be hard for them to get another job after being laid off.

What local governments need to do is offer free technical training and preferential policies for education to help promote re-employment of rural migrant workers. They should also allow market forces to play a role in encouraging migrant workers to buy homes in cities, in order to create a virtuous circle in which the workers will be more willing to buy homes based on growth in their revenue.

The author is a reporter with the Global Times. bizopinion@globaltimes.com.cn



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