End dependency on land sales

The real estate markets in China's major cities are showing signs of cooling down, as indicated by the housing price data recently published by the National Bureau of Statistics.

Such a positive trend is the result of the strict regulatory measures adopted since late September. However, it is still an uphill task for the government to really realize the target that "houses are built for inhabitation, not for speculation", which the central government stressed at the just-concluded Central Economic Work Conference.

Whether the regulatory measures adopted by the authorities will check realty speculation remains to be seen.

Considering land sales have long remained a major source of fiscal revenue for local governments, they usually have an ambivalent approach toward real estate regulations that reduce the demand for land and thus they are reluctant to take substantial measures to crack down on housing prices as that may result in a decline in their land sale revenues.

Therefore, the central government should consider how to strike a balance among the different interest groups in order to ensure rational real estate markets, and it should push for the establishment of a complete registry of properties nationwide to identify who owns them and identify uninhabited houses so as to implement a property tax system targeted at real estate speculation.

At the same time, the financial deleveraging campaign for the property sector should be substantially advanced to ensure no speculative funds flow to the real estate market and fuel irrational price rises.