To rein in soaring house prices in many Chinese cities, an increase in the supply of land and houses is as important as measures to control demand either for improving living conditions or for speculation.
Shenzhen's latest progress on reclaiming idle land lots might deal speculative property developers a heavy blow. But it is far from a decisive move needed to check excessive hikes in house prices partly caused by a shortage of land.
It was reported that the municipal government of Shenzhen recently re-examined 738 approved construction projects and took back 27 land lots left idle for at least two years in accordance with a land use regulation.
This effort aims to prevent property developers from hoarding land, a practice believed to have aggravated the shortage of housing supply. Such strengthened law-enforcement will surely give a warning to those developers who have banked land for higher profits.
Obviously, if land lots left unlawfully idle are reclaimed by the government as new land or immediately put under construction by developers, the supply of housing in the local market will get a considerable boost.
But in comparison with the need of a huge increase in land supply to cool the housing market, such efforts are just tinkering at the edges of a problematic land supply system.
It is reasonable for local governments to strictly control the supply of land. As the world's most populous country, China faces a tough task in preventing real-estate projects from eating too much into its declining stock of arable land.
Yet, when tightening supply of land adds fuel to runaway house prices, local authorities should first take stock of available land lots and then put them on the market as soon as possible. Of course, they should also require property developers to make more efficient use of these land lots.
The government's move to increase land supply will in itself send a strong signal to the red hot property market. Some potential house-buyers will put off their purchases in the hope that house prices will stabilize soon. Those developers that have banked land for higher profits will find that it will be at their own peril to delay construction if other competitors are grabbing a bigger market share.
House prices in 70 large and medium-sized Chinese cities rose by 9.5 percent year-on-year in October. The rise, 0.6 percentage points higher than that of September, hit a new high.
(China Daily November 27, 2007)
