Minister admits feeling pressure on home prices

PUBLISHED : Tuesday, 09 March, 2010, 12:00am
UPDATED : Tuesday, 09 March, 2010, 12:00am

The central government has admitted it is under enormous pressure to rein in housing prices in the next two decades amid concerns that the high prices could lead to social instability.

Housing and Urban-Rural Development Minister Jiang Weixin said yesterday that a combination of rapid urbanisation and industrialisation as well as limited land supplies in the next 20 years could put the country under enormous pressure.

'But the central government's determination to control the rapidly rising housing prices is even greater,' Jiang declared.

The minister's pledge came amid rising public discontent over what many have perceived as the government's failure to cool the red-hot property market, in which prices have more than tripled in major metropolises since 2005.

The minister was questioned yesterday over the affordable housing scheme's inability to provide low-income families with cheaper homes. The scheme has been increasingly susceptible to corruption because of the lack of transparency.

Authorities have been reluctant to tackle rising property prices because it provides regional governments with billions of yuan from land sales.

Jiang said he understood the aspirations of regional governments to see housing prices rise because of the extra revenue that sales generate, but they must be responsible for potential social repercussions stemming from excessively high property prices.

The Beijing municipal government pocketed 92.8 billion yuan (HK$105 billion) from land sales last year, equal to 46 per cent of its revenue, official figures show.

But housing prices have become a sensitive issue. Public frustration over home prices was highlighted by heated discussion about a TV drama, Dwelling Narrowness, dealing with the plight of an out-of-town couple trying to buy a new home in the city.

During an online discussion late last month, Premier Wen Jiabao was also challenged on how his government would tackle high housing prices.

Beijing-based housing activist Yu Linggang said the wild housing prices were a result of the ineffectiveness of government housing policies, which allowed developers to profiteer by hoarding land.

Yu said governments should not sell land directly to developers but develop public housing for low- income families.

Huang Wenzai, chairman of Star River Property Holdings and a member of the Chinese People's Political Consultative Conference, said the government should earmark at least 50 per cent of its revenue from land sales for affordable housing schemes.