Jake's View | A paean for property speculators and why the market needs them to function properly
People don’t like venomous snakes. People also don’t like speculators. Yet without snakes we would be subject to more plagues of rats. Without speculators we would be subject to more shortages of housing.
[President] Xi underlined his housing policy when he outlined his vision for the mainland’s development over the next five years at the opening of the party congress last week, stressing “houses are built to be inhabited, not for speculation.” -- Property Post, October 25
Thus spoke the master, whereupon tens of thousands of loyal servants leapt to obey the command by instituting yet higher down payment ratios and more rules to drive off the hordes of evil speculators.
The results were predictable. A trend of declining home sales across the country established itself all the more firmly. Fewer houses will be built for either habitation or speculation. They will simply not be built.
Once again, we have here the law of unintended consequences at work. It is an echo of this week’s decision by the Communist Party Congress to adopt a reference to Xi Jinping Thought in the party constitution. My guess is that it will weaken the constitution more than it strengthens the president.
But back to housing. People don’t like venomous snakes. People also don’t like speculators. Yet without snakes we would be subject to more plagues of rats. Without speculators we would be subject to more shortages of housing.
Speculators serve a valuable social function in taking the financial risk of development off the hands of developers, thus letting them get on quickly with their next housing projects.
And if you think that property speculation is a guaranteed easy way of making unearned money, then go and try it yourself some day. It all looks easy at the moment, but wait until we get a market correction and we shall talk again.