Page 1 of
2 SUN
WUKONG China's land supply
conundrum By Wu Zhong, China
Editor
HONG KONG - The price of a
commodity is determined by supply and demand. Any
basic economics textbook teaches that. However,
this law may only apply to a freewheeling market
economy and from a long-term perspective.
China boasts about being a socialist
market economy with Chinese characteristics.
Hence, despite the economic reforms and opening up
over 20-plus years, some sectors remainz
monopolized or tightly
controlled by the state.
According to the
Chinese constitution, all land is publicly or
collectively owned, and thus in effect belongs to
the state. Therefore, land supplies are not
decided by market forces but by the government. As
such, the price law may not always apply.
The property market in Guangzhou,
provincial capital of Guangdong, is a good
example. Although the municipal government
significantly increased land supply for property
development last year, seemingly to adhere to the
central government's policy to cool down the
sector, land prices, and hence housing prices,
have kept soaring.
According to a report
by the state-run Xinhua News Agency last week, the
average price of a new apartment in Guangzhou hit
a record high of 7,524 yuan (US$970) per square
meter in January, in spite of the city
government's efforts to curb property prices. The
new price represented an increase of 85 yuan per
square meter from December, and 500 yuan from
November.
According to statistics released
by the city's land-resources and housing
management authority, more than 7,200 residential
apartments, with a total area of 820,000 square
meters, were sold in January. These figures
represented the biggest buying run since the local
government implemented measures to control the
property sector last May. The number of flats sold
in January was over 1,000 more than were sold in
December, representing an additional 100,000
square meters of gross floor area.
Li
Wenjiang, chief analyst at Hopefluent Real
Properties, a Hong Kong-listed property agent and
consultancy, attributed the price rise to the
bullish sentiment in the stock market last year,
which brought in extra income for local market
players.
"Many residents raked in bumper
harvests from the stock market last year. Some
chose to buy houses with the money they earned
from the stock market, either to improve their
living conditions or as another investment to
dilute their risks from playing the stock market,"
he was quoted as saying. "Their purchases
increased demand, which drove up prices."
He said apartment prices in Guangzhou
would continue rising this year despite the
possibility of dips after the Lunar New Year, or
Spring Festival, which falls on February 18, and
before May. And he predicted that apartment prices
would range from 6,800 yuan to 7,500 yuan per
square meter this year.
In fact, in
downtown areas, apartment prices already exceed
10,000 yuan per square meter. A mid-echelon
Guangzhou government official, whose monthly
salary is between 5,000 and 6,000 yuan, can barely
afford to buy a 120-square-meter flat with his
entire income of 20 years. Some officials have
begun to complain, asking the government to
increase their housing subsidies.
One may
wonder whether the problem is really caused by a
shortage of housing land in Guangzhou. Actually,
the exact opposite is true.
Early in 2005,
when the central government strengthened its
belt-tightening policy, with cooling down the
property market one if its main objectives, major
developers in Guangzhou claimed that housing-price
hikes in the city were mainly the result of a land
shortage.
Buying this argument, the
Guangzhou municipal government began to increase
land supply. According to official statistics, a
total of 45 lots were sold for housing
construction in Guangzhou for the whole of last
year, bringing the government total revenue of
13.9 billion yuan, up 127% from 2005. In the first
11 months of last year, 32 pieces of land totaling
more than 1.9 million square meters were sold, 4.6
times the amount in 2005, on which 4.45
Head
Office: Unit B, 16/F, Li Dong Building, No. 9 Li Yuen Street East,
Central, Hong Kong Thailand Bureau:
11/13 Petchkasem Road, Hua Hin, Prachuab Kirikhan, Thailand 77110
