Action needed to broaden home ownership

PUBLISHED : Monday, 01 May, 2006, 12:00am
UPDATED : Monday, 01 May, 2006, 12:00am

For decades, a decent apartment was a privilege largely reserved for civil servants and state-owned company employees.

So when the government licensed the first batch of property developers in the early 1980s, mainlanders for the first time were able to buy a house if they had the money.

But the property market did not actually take off because the vast majority could not afford commercial housing and had to rely on their bosses for any improvement in their living conditions.

Xu Yong, aged 48, was one of the lucky few to have the money. As a middle-ranking manager at a state-owned sanatorium in Qingdao, Mr Xu was entitled to a three-bedroom apartment in one of the city's premium locations.

He later bought outright ownership of the property for just 40,000 yuan, an asset that is today valued at more than one million yuan.

His windfall was made possible by a landmark housing reform package in 1998, under which the housing allocation scheme was replaced by a fully market-oriented housing sector.Beijing Technology and Business University associate professor Geng Liping said the new system was intended to improve living conditions for the general public because housing development was failing to keep up with economic growth and rising income levels.

In 1997, per capita living space in urban areas was 8.8 square metres, far below the internationally accepted 30 square metres.

But Professor Geng said the policy had largely failed to hit its target.

'For some reason, the government was really naive in believing that the market alone could solve all the problems, and the vast majority seemed to have ended up losing out,' she said. Someone left out was 50-year old Liu Lili who shares a small, one-bedroom flat with her husband with their adult son in a rundown area of Qingdao. With less than 2,000 yuan a month between them and a college student to support, Ms Liu said it never entered her mind to buy a home.

'Owning a new property is just unthinkable when you watch the prices rising day by day,' she said.

Housing prices in Qingdao have jumped more than 70 per cent since 1998 to 5,000 yuan per square metre, and in major cities the prices are closer to 7,000 yuan per square metre.

According to a report published by Beijing Normal University, 70 per cent of mainlanders cannot afford to buy a home.

Professor Geng said that an office worker earning a 6,000 or 7,000 yuan salary a month would have had no problem buying a home several years ago, but that goal has become increasingly more distant.'Something must have gone badly wrong if these people are also losing out,' she said.

Professor Geng said the indifference of local authorities and a lack of governance had contributed to flaws in the affordable-housing scheme.

The government introduced the scheme in 1998 to offer cheaper land and incentives to developers to build housing with a price tag between 30 per cent and 50 per cent cheaper than market average.

But statistics suggest the percentage of subsidised estates has not gone past 6 per cent over the years and low-cost developments that hit the market may not benefit those in most need.

Professor Geng said that to develop a viable housing reform package, the government must 'step in where the market forces have failed and stay out where the market can do a good job'. And by that she meant the government should be active in providing affordable housing and leave the rest to the market.