Regulation needed to protect real economy: experts

Tight property market policies needed to protect real economy: experts

China's real estate market continued to stabilize in November, with house prices in first-tier cities falling slightly compared with the previous month, while some smaller cities still saw a rise in house prices, data released by the National Bureau of Statistics (NBS) showed on Monday.

"The real estate market was generally stable in November with no big changes," Zhang Dawei, an analyst at Centaline Property, told the Global Times on Monday.

Experts also said the government might continue with its tight property management policy in 2018, but argued that this is necessary as high prices in the real estate sector take vigor away from the real economy.

Policies working

According to the NBS, which monitors house price changes in 70 major cities in China, new and secondhand homes in domestic first-tier cities saw an average fall in prices of 0.1 percent and 0.2 percent, respectively, in November compared with October.

In November, new house prices in Shenzhen fell by 0.2 percent on a monthly basis, while Guangzhou, capital of South China's Guangdong Province, saw a fall of 0.1 percent month-on-month, the NBS data showed. Shanghai and Beijing saw no change in new house prices in November.

Yan Yuejin, a research director at the Shanghai-based E-house China R&D Institute, told the Global Times on Monday that certain cities, like Shenzhen, have experienced an "evident" cooling in their house prices, showing that the government efforts to regulate the property market have been effective.

In smaller cities, the NBS data showed that new house prices in second-tier cities rose by 0.5 percent month-on-month in November, while new house prices in third-tier cities rose by 0.4 percent.

According to media reports, more than 100 cities have rolled out policies to cool down the property market in 2017.

These policies include limits on house buying, as well as on house prices and loans.

Prices squeezing growth

Experts have also argued that management of the housing sector is needed to stop the sector from squeezing the development space for the real economy.

Shen Yang, a research fellow with the Chicago Institutional Economic Center, told the Global Times on Monday that soaring house prices have caused a lot of damage to the manufacturing sector in coastal areas over recent decades.

"In third- and fourth-tier cities, the housing bubbles have pushed up the cost of both land and labor for the manufacturing and services industries. Even Huawei had to relocate some departments from Shenzhen to find more affordable office space," Shen said.

House prices in Shenzhen soared 50 percent year-on-year in 2015, the biggest increase in house prices globally, media reports said in May last year.

The soaring prices prompted Huawei Technologies Co, a leading domestic telecommunications equipment maker, to shift some of its production facilities from Shenzhen to Dongguan, another manufacturing hub in Guangdong, which is 64 kilometers away from Shenzhen.

The mayor of Shenzhen admitted subsequently that about 15,000 companies had moved out of the city due to issues including high land costs, media reports said.

Shen also noted that this situation is bad for the domestic economy as the strongest pillar of China's economic growth in recent years has not been the real estate sector, but new technology companies that can carry out intelligent production.

Regulation to continue

According to Yan, it's very likely that in 2018 the government will stick to its current "management logic" of suppressing demand for house purchasing, particularly in some cities in western China where house prices are rising too quickly.

A report at the 19th National Congress of the Communist Party of China in October stressed that houses should be used for living in, not for speculative purposes.

"[The government's future property policies] will depend on the general economy. If the economy is not strong enough, then the real estate market will still need to fulfill its responsibility of underpinning growth," Yan noted.