By Sun Xiaosheng and Zou Shengwen

In the wake of May 11, when seven ministries and commissions of China issued a document designated to stabilize the house prices, the house prices in Beijing still fluctuated at high levels, which seemed to be amenable to the document, in contrast to the consequential decline of house prices in Shanghai and other areas. Why did the new policies on real estate industry adopted by the relevant departments of the State fail to bring down the high house prices in Beijing?

We, the co-authors, were acquainted on a real estate display fair in Beijing in May with the fact that on the first day of the exhibition, the total trading amount was 369. 6 million yuan, and there were in total 417 houses traded in total with the overall area amounting to 38,856 square meters, keeping the trading amount of each apartment at 886.3 thousand yuan on average and the trading unit price was as high as 9,512 yuan per square meter. Insiders said, "The possibility that Beijing house prices are amenable to policies is very slim. The grow margin of house prices may narrow down, but the decline of house prices is not possible in the near future."

Keeping our eyes closely on the recent housing market in Beijing, we can clearly feel that houses in Beijing are under the pressure of price hike under the pacific disguise. The 17th Beijing Real Estate Display Fair for Individual House Purchasing on May 12 is the first housing display fair held after the adoption of new housing policies. The questionnaire investigation during the fair has shown that 56.3 percent of house purchasers believe that house prices "may go down" in the coming year, while 24.6 percent believe that the prices "may go up".

What is the factor that has propped up the house prices in Beijing at high levels?

The reason why the newly adopted policies failed to greatly bring down the house prices in Beijing is, according to the real estate developers, the short supply of houses in Beijing.

In terms of supply, the number of newly opened real estate projects in Beijing in the first half of 2005 was only a half of the figure on a year-on-year basis, while the demands in Beijing real estate market are still quite strong. It is calculated that in the first four months of 2005, the supply in Beijing real estate market has dropped by nearly 30 percent over the same period of last year. Therefore, the price hike is a normal reflection of the market.

Houses in Beijing are also under the influences of some other special factors in addition to the general supply-demand relations.

The real estate market in Beijing, the political and cultural center of the country, has its peculiarities. Beijing has the largest group of civil servants, the largest scale of foreign-oriented institutions, the largest number of Beijing-stationed offices of other provinces and cities, the largest number of white-collars, the largest contingent of scientific and educational personnel, and the largest number of cultural and arts organizations and practitioners.

According to the working staff with relevant departments of Beijing Municipal Government, the average profit in Beijing's real estate development industry exceeded 15 percent of the house prices, and the figure is much higher in the prime sites within the second and the third ring roads, which is well beyond 20 percent. However, in the mature real estate markets abroad, the figure is generally controlled within 5 percent or so. Behind these high-sounding excuses, it is undeniable that the real estate developers are incessantly grabbing high profits.

Houses cannot be regarded as a sheer commodity. It has seventy percent features of a commodity and thirty percent of public goods. It is the unshirkable responsibility of the government to ensure the right of abode of every citizen. Viewed from this perspective, the government must conduct necessary supervision and management in the real estate market.

Special factors can be allowed to be neither the excuse for the rising house prices in Beijing nor the excuse under which real estate developers grab sudden huge profits. To the special situation in Beijing real estate market, the Government should carry out scientific regulations on house prices. It should particularly adjust the current supply-demand structure of the housing products, put restrictions on the number of slap-up houses with a large area going into the market, and properly increase low-rent houses and economical houses to ensure that those who buy these houses are the genuine low-income family. Statistics have shown that the annual traded houses in Beijing occupy an area of about 60 million square meters, among which only about 3 million square meters are economical houses.

The macro-control carried out by the Government over the real estate market is not aimed at pressing the house prices down to the lowest possible level, but at bringing the prices down to a normal level. Experts hold that the normal growth margin of house prices should be 2 or 3 percentage points higher than the growth margin of commodity prices.