According to a report released by the China Index Academy last week, land markets in first-tier cities are expected to soon face supply shortages, leading to rising residential prices in the future; while property prices in most third- and fourth-tier cities will likely go down due to ample land supplies and weak potential demand.
Obviously, the differentiation in the upstream land market will eventually be reflected in supply, demand and price changes in the housing market. In first-tier cities, land shortages will prop up home prices, increasing financial burdens for potential home buyers; while in smaller cities, land oversupply will not only cause resource waste but also lead to property depreciation. With such differentiation, it would be increasingly hard for the government's housing policies to achieve their desired effects.
Authorities must adjust land quotas to strike a balance between supply and demand in various local markets. Moreover, the government should also make efforts to guide rural populations into third- and fourth-tiers cities instead of big metropolises during the urbanization process.
The author is Feng Haining, an economic commentator.
China's social trust index declined further last year, according to the Annual Report on Social Mentality of China 2012