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The lofty goal of the Chinese government to have all its people sheltered notwithstanding, its policies have been accused of containing congenital defects predestined to invite housing prices that are forbiddingly high to ordinary people.
Liu Fuyuan, deputy director of the Macro-Economic Institute under the National Development and Reform Commission (NDRC), was the first scholar to open fire at the country's real estate policies.
"The current land-leasing system and industrial policies encouraging house purchases rather than house renting seem too radical in comparison with the country's real conditions. They not only drive up housing prices but also jeopardize the healthy growth of the national economy," said Liu in a lecture in Guiyang, capital of southwest China's Guizhou Province.
As the most crucial determinants, construction cost and average profits make up only one-third of the housing prices charged in China. Domestic consumers have to pay high prices for land taxes and other fees originally imposed by authorities to real estate developers.
Liu ascribed the expensive land tax and fees to an improper land lease system which allows government, the landowner in China, to lease out the use of land to real estate developers for 50 to 70 years. As a result, consumers have to fork over the costly rent at one time while the government no longer receives proceeds from the land leased out for decades.
"The system, in other words, is virtually helping developers legally sap state coffers and puff up their own purses," Liu said.
To check the runaway housing prices, Liu suggested state-assets management authorities re-appraise the value of land and collect land taxes annually from all appropriators of public-owned land.
The land tax rate can be set based upon the current 50-year or 70-year rental. A re-evaluation should be done at least every five years to adapt to the need of urban development and economic growth, he said.
Additionally, all existing fees related to real estate development should be inspected and turned into taxes when necessary to avoid the loss of state assets. Moreover, detailed criteria must be established to allow taxation authorities to charge real estate duties on all houses, old or new based upon their current value.
Calling the goal of having all Chinese possess their own residence "nothing but a fantasy", Liu said that even in developed countries only an average of 44 percent of residents can afford to own their own houses. In extreme cases like Hong Kong and the United States, the ratio is also no higher than 60 percent.
"Economic rules tell us wage earners always have to stretch their paycheck, which means their extra expenditure on housing will guarantee a consumption decline in other aspects. Therefore, if the housing industry gets overheated, other sectors will become stagnant," he said.
According to a survey by SDRC Macro-Economic Institute, a healthy expenditure on housing which covers rental, water and electricity bills and other fees related to property management should be no higher than 22 percent of one's total income.
To help industrial workers gain access to a good residence, Liu suggested the government map out effective policies to activate the apartment-leasing market.
"At least 20 percent of urban dwellers can only afford tenement at this moment, apartment renting would be a good option for them," he said.
As China urbanizes, more than 100 million farmers have swarmed into cities for jobs every year, causing a net annual average growth of 15 million in the urban population.
An industrial policy encouraging house renting rather than house purchases will convenience the flow of laborers, reduce the cost of living in cities and secure a healthy consumption structure allowing different sectors to prosper evenly, Liu noted.
"Another immediate impact," he said, "would be to eradicate the embarrassment that more than 70 percent of industrial workers find no good shelters to reside in while developers exert their utmost strength to build posh mansions for the rich."
(Xinhua News Agency July 12, 2005)
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