In defying four years of official cooling efforts, China’s soaring house prices reveal an uncomfortable truth: government is one of the biggest obstacles to the success of taming the market.
State income is so entwined in the need for rising land prices that policy efforts to try to curb the house market create an inherent conflict of interest.
With one hand on a patchwork of controls aimed at taming record house prices, governments with their other hand are at the same time selling land to developers at rising prices.
Homes in cities such as Beijing are more expensive by some measures than Britain or Japan, a dismal outcome for a central government campaign aimed at making homes more affordable to Chinese. House prices in September rose nationwide at their fastest pace in three years.
“The starting point of local governments is to keep land prices relatively high,” said Zou Xiaoyun, deputy chief engineer at China Land Surveying and Planning Institute, a research unit affiliated to the land ministry. “Governments are not willing to see home prices fall.”
This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.