Two experts debated how to formulate real estate policies during a discussion at the recent Boao Forum for Asia Annual Conference, with one arguing that market forces should be given full play and multiple-track approaches should be dispensed with, while the other contended a double-track approach must be employed to meet the housing needs of low-income groups.
As real-estate is an extremely complicated issue, China's current multiple-track approach to real estate policies – a set of policies tailored to the needs of different groups of people – should be discarded to simplify the situation and let market forces help realize the ideal of making homes affordable, according to Li Yang, president of the National Institution for Finance and Development.
Specifically, he stressed that land supply should increase at the same pace as urbanization, because, as he said, “if land supply is out of step with urbanization, shortage will arise,” causing housing prices to hike. He also warned that the role of the cost of land in housing prices must be controlled.
Li proposed that the taxes or charges levied on real estate developers should be significantly reduced, because developers will end up shifting such burdens to the buyers by hiking prices anyway. He argued that property-based and land-based taxation systems of governments at various levels should be integrated to avoid double taxation and other conflicts.
By contrast, Jia Kang, chief economist at China Academy of New Supply-side Economics, argued that a double-track – affordable and commercial housing – approach must be employed. The government should guarantee that 35 percent to 40 percent of homes on the market are affordable housing, to meet the housing demands of low- and medium-income groups.
In the rest of the market, market forces should play a full part, according to Jia. The balance of this commercial track could be secured through competition.
“Li leans towards a market forces-oriented approach, whereas Jia wishes to see a more aggressive government,” commented another attendee, Wu Xiaoqiu, vice president of Renmin University of China and director of the Institute for Financial Studies at the university.
Wu explained that both experts shared the view that marketization is the fundamental solution to the problems of China's real estate market, albeit the approaches to marketization is slightly different.
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