Top Biz News

Clarify housing priorities

(China Daily)
Updated: 2006-07-15 09:17

The belated move by the Ministry of Construction to clear confusion over its new housing development guidelines is welcome. By defining the space requirement for small houses in a stricter way, the government has demonstrated its resolution to rein in excessive hikes of house prices.

However, to stabilize soaring housing prices and increase supply of affordable homes for the public, the authorities must refocus housing policies respectively around each of these two goals. Combining efforts for the different aims might risk negating them.

Responding to surging house prices and public complaints about a growing shortage of affordable homes, the State Council issued a circular in May to cool down the overheated real estate market.

One requirement was that small apartments no bigger than 90 square metres must now account for no less than 70 per cent of new homes being built.

As house prices have kept rising in recent years, more and more developers have chosen to build large-floor homes to maximize their profits.

All things being equal, the new cap on floor space will lead to an increase in supply of homes with a relatively low total cost, allowing more consumers to fulfil their dream of home ownership. In this sense, the floor space limit is needed.

But the market, more specifically, real estate developers, could not agree on what the 90 square metres includes. It could refer to the sum of the usable floor space and the shared public space in a residential building. It can also mean a home with 90 square metres of usable area while its actual floor area reaches up to 110 square metres. The later is obviously a preferred interpretation among real estate developers.

Such ambiguities have partly delayed the implementation of the cooling measures in most cities and have been perplexing the real estate market.

How to define the space requirement has thus been deemed a litmus test of the government's determination to take a tough line against runaway housing price hikes.

On Thursday, the Ministry of Construction gave an explicit and strict interpretation of the space limit. That is surely a message property developers should take to heart.