Housing prices in China increased further in recent months largely because the market believed the country's new leadership would not take measures to change the existing housing policies after assuming office in March. There is speculation that even the current housing regulations could be loosened or lifted.
Despite its unwavering determination to maintain strict housing regulations, as indicated by the tone of the Central Economic Work Conference, the government has so far failed to take forcible measures to change the housing market's speculative nature. On the contrary, the recent emphasis on urbanization and accelerated efforts to provide more housing units is likely to fuel fresh speculation in the real estate sector if preventive measures are not taken soon.
The trend of the housing market this year will be decided by how far the government will tolerate further increase in housing prices and whether it takes necessary measures to turn the real estate sector into one led by self-accommodating demand. That, however, will depend on the new leadership's determination to press ahead with stricter housing regulations. If speculation in the market persists and necessary measures are not taken to change the housing sector's trend, housing prices will continue to rise and inflate the price bubble further, which will push China toward the old economic growth model.
But if the new leadership shows zero tolerance toward speculation and expedites efforts to implement sweeping reforms in the housing market, such as adopting harsher credit and taxation policies, to deflate the price bubble, then the market will jump back on the track of reasonable and healthy development.
The author is a researcher with the Institute of Finance and Banking under the Chinese Academy of Social Sciences.
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