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Warm thoughts on cooling home prices as market slows

By Joseph Christian (China Daily)
Updated: 2010-06-22 08:13

A couple of months ago, the newspaper headlines read "A ticking time bomb", referring to China's runaway housing market. More recently, the newspapers warned "Home sales plummet" and predicted sharp increases in property taxes.

If such headlines do not give you pause for thought, consider a cold hard fact: Beijing's biggest property agency, Homelink, reported an 8 percent drop in the prices of secondhand houses in May, according to a recent article.

Also consider the rapid changes in Beijing housing regulations over the past few months. First there were regulations that tried to reduce housing prices by requiring as much as a 50 percent down payment for purchases of second homes in the capital.

More recently, families in Beijing were banned from buying more than one additional home.

Obviously the government is trying to cool the red-hot housing market to prevent the bubble from bursting with devastating results.

It's about time.

These days housing prices seem to be the No 1 gripe for most Chinese, save the filthy rich and those young enough to still be entranced by childhood bliss. Mainstream Chinese are outspoken about their frustration with the outrageous prices.

"I can't stand the prices ... they are ridiculous!" one of my students almost shouted when we discussed the topic.

Others, like my friend Mr Li, can only confront the situation with despairing unhappiness. About a month ago I had lunch with Li. It was a dreary day as we sat in a crowded restaurant.

We shared some laughs and a pleasant conversation until we got to the topic of Li's impending marriage. As I asked him his plans for housing he quickly diverted his eyes and looked out the window. In that moment of silence you could see his shame.

He finally turned back and said: "I don't have enough money to buy an apartment. I'm going to have to have a naked marriage."

Every Chinese girl dreams of a suitor who can offer her a big apartment, but with current housing prices, many men can't offer a ring or a car, let alone a big apartment. So they must settle for what the Chinese call a "naked marriage".

"Well at least I can afford a ring," Li said, cracking a slight smile. "So I'll only have a half-naked marriage."

I recently talked with another friend who has worked and lived in Beijing for many years.

"I used to think that 5,000 yuan per square meter was a high price," he said.

I guess that was during the good old days because now prices hover between 18,000 and 20,000 yuan per square meter. According to the China Index Academy, a real estate research institute, it now takes about 30 years of salary for an average Beijinger to pay off his or her home.

I can only hope that housing prices will decline to a more reasonable level that allows ordinary hard-working people like my friend Li to afford an apartment.

Not everyone is happy about the new regulations that aim to decrease housing prices. Property developers and speculators have been quick to complain because they benefit most from high prices.

Let them complain. They are the ones who got rich riding the wave that crushed the dreams of millions of Chinese who just wanted a home to call their own.

Instead, many have to give up on the dream or have become "house slaves" trying to achieve it.

While speculators aren't the only factor that led to stratospheric housing prices, they are a big part and for that reason they need to be better regulated.

Some might say that such regulations will stem economic growth. Maybe so, but it's better than having a property bubble explode in your face. If you don't believe me, then just look at what happened in the US in 2008.

I'm glad the Chinese government is finally pulling back on the reins. Hopefully, it will offer some reprieve to thousands of young couples in Beijing who wish to afford a humble abode. I hope it's not too little, too late.