Failure of Price-control Measures and Sustainable Development of

ORIENT ACADEMIC FORUM
Failure of Price-control Measures and Sustainable Development of
the Real Estate Industry -- Features and Trend of the Interests of
Local Governments
LIU Chenggao, FANG Zheng
School of Management, Southwest University For nationalities, China, 610041
Abstract: Real estate development and the stability of prices is increasingly becoming the focus of
attention. On the one hand, real estate development for economic growth and create conditions to
improve people's livelihood thus boosting the development of urbanization in depth and breadth. On the
other hand, high prices and a serious departure from the long-term purchase of the public's purchasing
power and affordability, in turn, become an obstacle to restrict consumption of urban residents, and even
threaten the entire economy and overall social stability and development. To this end, the Government
continued to impose control measures to the real estate and means to guarantee the stability and healthy
real estate market to run the vast majority of regulatory policy measures have little effect or even an
auspicious
Keywords: Real estate, Housing prices, Local governments
Real estate is a combination of both investment and consumption and industrial properties ,it has
policies and capital intensive ,high correlation characteristics of industry ,its driven forward and
backward link to the relevant industries long, wide ,significant multiplier effect, and thus contribute to
promote the rapid development of the national economy is huge. Associated with the role of this
industry can be said that comprehensive, multi-level, manifested in: real estate directly to the
construction industry to open up markets to raise funds for its cash flow. Through real estate
development, land development and directly stimulate the development of services to introduce and
promote the building materials, steel, machinery and other basic industries. Real estate market still on a
variety of consumer services related to start-effectiveness, including the rise and development of
property management services, directly involved in the business, hotel service activities for the third
industrial city inject fresh vigor. To real estate and investment-oriented role, city of a strong impetus to
basic facilities, particularly yes municipal company enterprise but will also promote and urban
infrastructure development related to the energy, telecommunications, transportation, such as the
development of so industry the proportion of the internal structure more reasonable. Real estate
development, will inevitably promote the financial industry, commerce and service sectors and the
whole development of tertiary industry, the proportion of three industries of the national economy more
reasonable.
Real estate and market sustainable and healthy development of premises, not only to improve people's
living standards and the "Home Ownership" of social goals, while also affecting the Government,
especially local government financial sources of income, the regional competition ability to enhance,
promote employment and stimulating the development of related industries, which to a certain extent
also carries the process of urbanization and the whole task of economic recovery. Therefore, we must
properly handle the real estate development and economic and social development, and from the public's
purchasing power and affordability, as well as with land, resources and energy saving strategies such as
the relationship between sustainable development, China's real estate development can the economic
development and make greater contribution to social progress.
In recent years, the Chinese Government to promote the growth of domestic economic growth is mainly
accomplished. Contribution to economic growth in the investment than is offered more immediate
consumption, so the current regulation means our economy is also largely around the investment-led
growth model to, and in many areas of investment in China, except for the people's livelihood
infrastructure investment, real estate investment is very important area of investment. The price boom
in real estate investments, driven again and again, in the interests of all parties keep the game in record
high.
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Generally, a measure of national and regional house prices are too high, to the following three indicators:
First Price Ratio. UN-Habitat in the capital city of more than 50 countries to conduct investigations that
a housing at a reasonable price should be 3 to 6 times the population, that is, a family income of 3 to 6
years, you can buy a house. If more than six times, most people will not afford to buy. In China, price
earnings ratio in 2008 had up to 8:1, Beijing, Shanghai, Guangdong and Hainan provinces and Tianjin
have a breakthrough price earnings ratio of 10:1, is the core area of Beijing reached a high of 22:1,
significantly high in Tokyo, London and Vancouver and other international cities. Second, the ratio of
rental housing . Per square meter floor area refers to the monthly rent and house prices per square meter
floor area ratio of between. International measure of well-functioning rental housing than the general
standard of 1:200 ~ 1:300. China's housing prices are currently far beyond the international alert line.
Beijing, for example, the rental is more than the basic 1:500 ~ 1:700 in this range. Many people are
buying houses for rental, if not enough to pay bank interest. Third, the absolute price. In 2008, in
Chicago, an area of 200 square meters of single-family house, new home sales median price was
264,000 U.S. dollars each, the figure of unit price is about 9,240 / square meter; Japan, a Tokyo
urban area of 80 square meters apartment building plus parking spaces cost about 30 million yen,
equivalent to 1.92 million , about 24,000 per square meter. Beijing 2009 City of Victoria for more
than 70% of real estate prices within the reach
20,000 / square meter. Taking into account the
purchasing power parity and national income per capita in China the situation, China like Beijing,
Shanghai, first-tier cities such as house prices has actually exceeded the European and American
developed countries, even more than the known high house prices in Dubai.
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In recent years, China's GDP growth rates and changes in trends
Figure Note: Statistics from the National Statistical Yearbook 2009, data gathered from
With the investment-led economic growth pattern of the dominant position more and more obvious, and
urbanization in China and the acceleration of the process of urbanization, China's real estate industry
into an unprecedented period of rapid development. On the one hand, real estate development for
economic growth and create conditions to improve people's livelihood, thus boosting the development of
urbanization in depth and breadth. On the other hand, high prices and a serious departure from long-term
purchase of the public's purchasing power and affordability, in turn, become barriers to restrict
consumption of urban residents, to our most pressing current negative impact on the growth of domestic
and even threaten the entire economy and overall social stability and development. For this reason, the
Government has been imposed to the real estate and means of control measures to guarantee the stability
and healthy real estate market line, in order to achieve the national economic and social co-ordination
and overall development. Chinese government a full range of real estate market, large-scale macrocontrol since 2003. First, central banks from 121 in 2003 for the purchase of high-grade commercial
housing document, villa or commercial housing policy over the second set of control measures began, to
the later "state 8", "six countries", until January 10, 2010, the State Council Office issued the
"promotion of the real estate market on steady and healthy development of the notice" (the industry calls
"State 11"), until today Bank on the property tax. State Department of Land and Resources and its
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affiliated, and Commerce, the Central Bank, China Banking Regulatory Commission, Supervision,
finance, taxation and other ministries or local governments, control measures and means almost the
multi-pronged hair. Unfortunately, the vast majority of regulatory policy measures have little effect, and
even still to some extent exacerbated the contradiction between housing supply and demand, thus
making prices rise more rapidly with impunity.
So, what factors have led to steadily rising prices in recent years, China's central government macrocontrol measures in the case of intensive introduced repeatedly out of control? The author believes that
the following aspects can be analyzed.
First, Supply and Demand Affect Price Trend Status.
Demand side, China's urban population in 1978 to 17.92% of total population, urban population in
China in 2007 the total population 44.90 percent, China's urbanization rate to 0.93 percent per year rate
of constantly advancing. If you take into account farmers seek jobs in cities, and the city settled the case
in China's urbanization rate should be higher actually. Urbanization and urban-rural integration process
speeds up, making the unprecedented increase in the number of urban population, many evolution of
rural surplus labor force for urban residents, resulting in a considerable extent prompted strong demand
for commercial housing market. And, because of urbanization and economic development brought about
by the increase in people's income levels, also affected and changed the consumption habits of urban
residents and the concept of consumption, so the demolition, alteration and new commercial housing
increased demand, especially for the living environment and facilities and public green areas of growing
demand for quality living, making the number of newly built commercial housing increased, but also
must be living environment, such as software and hardware facilities to invest more to a certain extent,
affected the price trend. Furthermore, due to fears of global and domestic banks to the market a lot of
liquidity injections, coupled with the international trend of domestic economic recovery becomes clearer
bottom, investors expectations of future inflation are increasingly strong, while the slow development of
financial markets, investment channels limited, as many of our home buy a house increasing the value of
household assets, the first choice. The market demand in addition to their own homes, improve sexual
needs, investment and speculation is also an important force to promote the housing prices.
Supply. While the housing supply in China in recent years, rapid growth, the proportion of residential
investment and absolute amount of investment growth is also apparent, however, had home based data
released by Statistics show that China's current investment and the supply structure of commercial
housing is still unreasonable, especially the ordinary low proportion of affordable housing, and villas,
luxury apartments investment proportion is growing. In late 2006, focused on the 5000 national real
estate development company of the vacant space survey, general housing, affordable housing, luxury
apartments and other commercial housing were vacant area of 10.12 million square meters, 128 square
meters, 2,610,000 square meters and 8.41 million square meters, accounting for real estate enterprises
the proportion of vacant space of commercial housing were 45.1%, 5.7%, 11.6% and 37.6%. House area
over 100 square meters of commercial housing the largest proportion of vacant space, reaching 71%.
Among them, the house area 100-120 square meters of commodity housing in the vacant space 23%
share; house area of 120 square meters of vacant commodity residential area of 48% share, while
meeting the housing relatively low-income families less, the greater the pressure on housing prices,
resulting in vacant commercial housing increasing as housing prices continue to increase in recent year
some of the reasons.
Second, Local Governments in the Interests of the Orientation is Deep-Rooted
Causes of House Prices out of Control.
If supply and demand causing price rise contradictions appearance, then, local governments in the
development of the great benefits of real estate disputes are frequent in the central price control
measures introduced in the case of intensive control of deep-seated causes. China's current
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implementation of the nationalization of urban land property rights system, in use right side is practiced
strokes (standard), film (sold), hanging (licensing) system. Per capita arable land area by the impact and
constraints, the scarcity of land resources and land, location differences, the Government has become
increasingly tight supply of land, further exacerbating the real estate development and land supply and
demand. The city demolition of existing procedures and systems and highly irregular, housing prices
caused people to expect rising earnings expectations, which in turn increased the difficulty of removal,
increased demolition costs, intensifying social conflicts.
From the point of view, land transfer, revenue payments are an important local government revenue
sources. According to statistics, China began to implement a system of land paid transfer, the land use
rights presents significant growth, transfer fees in the share of local revenue in the rapidly
improve :2001-2003, China's total land transfer more than 9100 million National and local revenues
over the same period about 35%. 2004, 589.4 billion selling price of gold, accounting for the local
fiscal revenue over the same period 47%. 2005 leasing income share has dropped somewhat, but still the
total 550.5 billion. In 2006, the total amount of land transfer even reach 7000 billion, after it is
rising every year, record highs.
According to the State Council Development Research Center of a report, land transfer, property-related
taxes accounted for 40% of local budgets, while the land transfer net income in a number of extrabudgetary revenue of local governments and even reached 60%. According to statistics, Chongqing real
estate tax income for 2007 more than 400 billion, accounting for 50.8% of revenue; Zhengzhou City,
the first three quarters of 2007 real estate and construction and installation industry tax revenue 4.06
billion, accounting for 48.6 total tax revenue the city %. Line from the three cities of view, the flow of
government development projects in Shanghai, the highest share, 65%. Followed by Beijing, to 48%.
Guangzhou, also reached the lowest 47% benefit local governments in the real estate industry is evident.
Resulting in major cities of the Government of the Urban Management, the management of land, selling
land to become the core content.
Therefore, in our government, especially local government is also involved in the real estate market and
the distribution of those benefits. Local government is the number one beneficiary of the real estate
market, land supply, the higher the price, the higher the price, the greater their gains, where both sides
through the land transfer system for huge gains, but also for real estate development , and Exchange
income, while industry driven association feature city infrastructure, such as municipal project
development, to the local GDP increase, official striking, and thus more mobility. The sharp decline in
arable land, the banks bad debts, resources and environmental degradation has generally not help local
governments pay the bill. It is this extreme asymmetry of costs and benefits, making local governments
as to promote the rapid development of China's real estate motivation.
As real estate developers, it is a community of interests of local governments. As we all know, real
estate development enterprise itself is not directly commercial housing production, but only the
integration of various resources and industry. In addition to land costs, the prices of raw materials and
wages in recent years, driven by rigid construction and installation costs and building materials cost
greatly increased, making commercial housing price components, the vast majority of rigid and Bu Ju
You control feature. Subjective terms, development companies certainly look forward to higher prices,
but in fact did not lead capacity, but also in the interests of the game with the Government to fight for
their own gain. Frequently in the macro-control policies against the background of shots, if the real
estate developers reaping excessive profits space, then the house prices to fall at least in theory; the
other hand, if the real estate business profit margins are not large, then falling prices The result is real
estate development and even bankruptcy to stop, but the low price of the house still made it out. The
author believes that developers in their marketing strategy adopted by the "protected disk cooperation
form are negotiable", "queue grab No." etc. means, both the high cost of land transfer and other
development costs, maximize benefits for due to the nature of capital, but also by the local government's
acquiescence and connivance.
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Third, the Real Estate Industry, Rent-Seeking Costs are Partly the Result of Total
Industry Costs.
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Rent real estate approval process and increased the cost of real estate development. In addition to
capital-intensive real estate enterprise features, but also characteristics of both policy-intensive, which
doomed the real estate development companies and the Government there are countless ties and
conflicting interests, combined with the development involves demolition , planning, land use, property
rights, taxation, fire fighting, environmental protection, quality control, aviation, dozens of green and
even force the government departments, schools and so complicated and lengthy process, and most of
the operation is not transparent, which gives the relevant state personnel and left a large number of real
estate operations and transactions can be black-box space. Real economy, those who have low-income
groups of all kinds of demolition, resettlement housing, low-cost housing and so eventually become the
official mansion and collective apartment, there simply will not stabilize the price, ease of supply and
demand contradiction, and this is precisely the inevitable result of their secret operations. The other to
the land market, for example, a market is monopolized by the government, that country through its
designated government departments will be town-owned land or rural collective land acquisition for the
state-owned land, after transfer to the user, as is the monopoly in land resources the hands, but hold the
land on the power of life or death over the power of administrative examination and approval
department lacks a comprehensive system of constraints for real estate development enterprises to create
a rent-seeking opportunities. On the real estate development enterprises, in order to access to land
resources, but also have an incentive to rent-seeking by government officials. So in the real estate
market, local governments and real estate development enterprises exists between complex, inextricably
linked, and even can be said that local government and a community of interests in real estate
development enterprises. Even more frightening is that almost different government departments in
different cities, gave the adjustment of real estate may also develop a number of seemingly similar
objects in fact fundamentally different rules and regulations, such randomness is not only to corruption
and rent-seeking has left The so-called operational opportunities and space, also allows real estate
companies in the land costs, building costs and taxes, it had also added the cost of corruption.
How, then, control the rising trend of excessive price and make more reasonable and stability?
The policy choice, we must resolutely deal with the central and local governments, the recent interest
and long-term interests of ordinary people and the relationship between the groups with vested interests,
efforts to structure the real estate market and real estate regulation. The progressive introduction of
government regulation of the real estate market, and Guan Li You direct to indirect Jinxing Role, the
Government should focus on market order to establish and maintain trading rules, fundamentally local
officials on land finance serious psychological dependence and rent-seeking. To focus on affordable
housing for low income groups and ordinary commercial housing supply, housing fund raising and use
of institutional building of people's livelihood, and enhance transparency and credibility. Bold
institutional innovations, such as trying to pay the land transfer in batches to reduce the cost of real
estate supply, soaring land prices in the city canceled the land auction system to increase the multichannel open and transparent land supply mode, open the appropriate transfer of rural collective land
and individuals to obtain land use rights restrictions and so on. In addition, the government can adopt
industrial development planning policy for the guidance to technology, culture, tourism and sports
industries, and real estate combined with various types of industries, especially to develop creative real
estate, thereby enhancing the types of resources The utilization efficiency.
Attention to fiscal measures, especially tax regulation means the important role of price regulation. Our
government regulates prices a long time usually taken by means of monetary instruments, especially
interest rate-regulated, such as increasing the down payment, raise mortgage interest rates, tightening
developers development loans. But the fact is, most of these control measures is to increase the role of
the entire real estate transaction costs and expenses of all parties, to play the role of containment is still
very small price. Another example of land for the real estate development company introduced valueadded tax is also due to increased development costs, the developer had to raise prices for the transfer
costs of sale, which in turn added to the burden of home buyers. Therefore, control measures should be
promptly corrected, in particular, to introduce high-end villas and apartments for the property tax, VAT
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and other taxes, especially for multi-suite owners transactions tax regulation, but also the establishment
of the part of the tax on low-income groups supply and effective protection.
Implementation aspects of the policy should be in establishing a unified real estate legal system in China
based on the joint law enforcement agencies set up specifically for the course in the real estate market
control unlawful government departments, the responsible person shall be held liable. The quality of
housing projects such as the establishment of a permanent system of accountability, there is the real
estate industry, rent-seeking and corruption and life-long ban on the implementation of individual files
into the system, increase the economic punishment. In affordable housing construction and allocation of
affordable housing economy created more open, transparent and fair procedures system, increase the
speculative
purchase
of
personal
credit
information,
monitoring
and
so
on.
To some extent, the stability of prices and real estate market stable, healthy and sustainable development,
on the one hand concerned about the environment, resources and ecological carrying capacity and
coordination level, but also to avoid the ups and downs of the industry itself. Can be said that the
sustainable development of such real estate as not only related to the current economic development and
social stability in the long run, is to re-adjust the pattern of the distribution of social wealth, ease
polarization, thus improving people's livelihood and promote social progress of the important One
breakthrough.
Author in brief or Acknowledgment:
Liu Cheng Gao (1969 -), male, Southwest School of Management (Chengdu 610041, Southwest
University For Nationalities), Associate Professor, Ph.D., Sichuan Yafeng law firm practicing lawyer
for the government and enterprises as a legal adviser and long-term engaged in real estate theory and
practice work. Research interests: real estate, social security. Address: Southern First Ring Road,
Chengdu, Si Duan 16, Southwest University MBA Center,
Tel: 13709054311, Email:[email protected]
Fang Zheng(1979-),Fang Zheng (1979 -), male, Southwest University of Economics and Management
Master, research direction: Higher Education Management, Human Resource Management. In "higher
education research," published two papers, participate in national issues, horizontal issue 4, edited a
textbook of economics and management.
Address: No. 16 Si Duan Chengdu First Ring Road, South, Southwest University for Nationalities MBA
Center, Tel: 13699476232 Eail:[email protected]
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