New leaders in Beijing face tough decision on property

The prospect of a housing surge is fraying mainland policymakers' nerves.

Alarmed by ballooning values - and the growing frustration of average citizens fearful of never owning a home - the central government in 2010 introduced curbs to cool the nation's overheated real estate market. It worked. Tighter credit, a crackdown on speculators and limits on purchases of second homes slowed price rises and stopped some developments cold.

But those moves also put the brakes on the hard-charging mainland economy, which relies heavily on construction and real estate activity. Last week, Beijing announced that third-quarter gross domestic product growth eased to 7.4 per cent from a year earlier, the slowest pace in 3-1/2 years.

Mainland leaders now face some tough choices. Do they rev up the housing market to create jobs and boost economic growth, even if it means fuelling class tensions and a potentially dangerous real estate bubble?

"A lot of things like steel-making, coal and construction equipment have taken a huge hit from the fall-off in real estate and would presumably be boosted by a recovery," said Patrick Chovanec, an economist at Tsinghua University in Beijing.

"The only reason they're not boosting real estate is that the alternative is actually worse."