Beijing's failure to keep promise leads to ineffective curbs

Lack of action against officials for not hitting price control targets erodes leaders' credibility

PUBLISHED : Tuesday, 28 January, 2014, 1:36am
UPDATED : Tuesday, 28 January, 2014, 1:36am

The mainland cabinet said in March last year that it would hold officials accountable if home prices soared out of control.

But 2013 saw home prices surge more than 20 per cent in many cities, apparently overshooting annual targets.

Yet, no action has been taken, dealing another blow to the central government's credibility at a time when it was much needed following President Xi Jinping's vow to root out some deep-seated problems and press ahead with reforms.

Governments are loose in policy implementation and discounted the measures

"If the home price control target is a promise from the government to its people, then holding someone accountable for not hitting the target is another promise to ensure the first promise is fulfilled," Xinhua said in a commentary this month. "If the target is not achieved and the accountability procedure is not taken, what's at stake is not only the broad property-tightening efforts, but also the government's credibility."

The mainland's pledge to set up an accountability system to help cool home prices dates back to 2005. Last year, it was the first item in a six-point policy package from the State Council, then led by former premier Wen Jiabao, designed to contain housing inflation.

It said that if policies were not fully enforced and home prices rose excessively, "[someone] must be talked to and held accountable", without explaining how.

But it urged municipalities and provincial capitals to announce home price control targets before the end of March, which were widely taken as the levels that would trigger the accountability system.

Most cities, such as Guangzhou, Nanjing and Xiamen, promised to keep annual housing price rises under the rate of growth in urban disposable incomes. Beijing's municipal government pledged to "keep the city's new commercial home price stable compared with 2012 and further lower the price of commercial homes for self-users and upgraders".

However, home prices rose 28 per cent in Beijing, the fastest across the mainland, according to the China Index Academy, the country's biggest real estate data provider and website operator. Data from the National Bureau of Statistics also showed annual housing price rises of more than 20 per cent in the capital, where real urban disposable incomes grew just 7.1 per cent last year.

Guangzhou tried a "smart" way to hit the target. It included two suburban districts, Zengcheng and Conghua, where home prices are much lower than the rest of the city, in its calculation of city-wide average home prices. Then local officials declared that Guangzhou had hit the target, with average home prices rising 8.1 per cent last year, lower than the 8.4 per cent increase in inflation-adjusted urban disposable incomes, according to the local Yangcheng Evening News.

But data from the statistics bureau and private real estate consultancies pointed to housing price rises of more than 20 per cent in the city last year.

Yu Fenghui, a mainland financial columnist, said on his Weibo microblog: "I always think that it's not that a spate of property-tightening policies is not effective. It's because local governments are loose in policy implementation and discounted the measures."

The housing ministry may have held private talks with a few local officials, which was why more than a dozen cities stepped up property-tightening measures in the past three months, according to domestic media reports. However, those conversations have never been officially acknowledged.

"The governments have repeatedly broken their public promises," Yu said. "How could control measures be effective?"

If the situation continued, people would become very disappointed and home prices would probably skyrocket, eventually leading to an economic crisis, he warned, adding "this is not just alarmist talk".

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