Contain the price of housing, a constant challenge for the Chinese Government

Since his rise to power in March 2013, Chinese President Xi Jinping has asserted a large part of his domestic policy reforms, with one exception that has ended up becoming a permanent challenge for his Cabinet: the containment of real estate market prices.

"The houses are built to be inhabited, not to speculate," said the president during the XIX Congress of the Chinese Communist Party (PPCh) in October 2017, a question that a year later is still not resolved, since a fifth of homes in China, around 50 million, are empty.

The data, taken from a recent report by the University of Finance and Economics of the Southwest, is revealing about the current state of the real estate market, which makes China the country with the highest proportion of empty homes in the world (22.4% ), well ahead of Japan (13.5%) or the United States (12.7%).

One of the reasons is the price, which is currently one of the main obstacles to access housing property in China, especially for the youngest.

According to data from Numbeo, a platform that compares the prices of different cities in the world, the cost of the square meter in the center of Beijing is 101,111.08 yuan (12,924.38 euros), higher than New York (12,705.63 euros) ) even though the net pay of Pekingese is almost 75% lower than the New Yorker.

Thus, the average citizen would cost about 45 years of salary to buy a house of 50 square meters in the center of the capital, a reality that has closed millions of people the doors of the real estate market, considered a symbol of welfare for the middle class of the country.

This problem is very common in the first and second tier cities in China, which since 2015 have experienced year-on-year increases of up to 35% in the cost of housing.

In this sense, the concern for a possible housing bubble, which partially broke out in 2012 and then in 2015, led the government to impose a total of 270 restrictions in 110 Chinese cities last year, favoring residential rental and raising the minimum rent to Apply for a mortgage.

Since then, and although prices are still high, the real estate market has become more "stable," according to Zhao Bo, an assistant professor at the National School of Development at Peking University.

"The measures of the Government yes that have had effect in the cities of first level and in some of second level, with some light descents of price", commented to Efe the economist.

For Mei Jianping, a professor at the Cheung Kong Graduate School of Business in Beijing, the real estate sector faces a "transition period", due to the "recent credit restriction", although it does not rule out new increases in the future.

"With the current state of the economy, I do not think we will see significant price increases in the third and fourth tier municipalities, but in the first and second tier, it depends," the expert said.

"For cities with great economic growth, I think that it is still possible for the price to rise further, although it will be a smaller growth than in the last twelve years," he added.

The Chinese Government faces, then, a double reality: on the one hand, it is committed to containing the price of housing due to the discontent of one sector of the population, but on the other it is aware that a sudden drop in the real estate sector could harm seriously to the economy.

This paradigm also affects citizenship, divided between those who own property and those who lack it, which has also generated greater inequality.

"For both young people and families who rent flats, a price increase is not desirable, but the rich do benefit from the increase," says Zhao Bo.

However, and also due to the economic slowdown, the risk assessment agency Standard & Poor's warned that the price of housing had reached its peak and would decrease by 5% in 2019, a fall that will cause the sector to contract. between 8 and 12% next year.

Javier Castro Bugarín


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