The central government has so far taken ample steps to cool China's property market. But as cities take turns leading the increase of house prices, policy-makers should not just wait for new tightening policies to take effect.

The latest survey by the National Development and Reform Commission and the National Bureau of Statistics shows that growth of urban house prices remained robust.

House prices in 70 major cities across the country rose by 5.7 percent year-on-year in the second quarter of this year, 0.2 percentage points higher than the previous quarter.

The cabinet has decided to significantly tighten the rules regarding housing transactions and down payments on mortgages, in a bid to cool down the country's overheated property sector.

It is surely too early to judge the effect of many new housing policies, like the June 1 increase in the minimum down payment for a new apartment larger than 90 square metres. But the second quarter results indicate that many previous measures adopted to check excessive hikes in house prices have amounted to little.

Yet, more telling than the average figure is the price trend in specific cities.

Shenzhen, a coastal city in south China, saw its house prices jumping by 14.4 percent in the second quarter, the fastest growth among all the 70 Chinese cities, according to the survey. Shanghai, the former champion, meanwhile became the only major domestic city where house prices actually fell, dipping by 2.8 percent.

The good news is that the case of Shanghai serves as a living example that the central government's measures to cool property market can work if implemented aggressively. Skyrocketing house prices in Shanghai not only used to surprise the whole country but also bolstered price hikes in many other cities' property markets. But after the central government paid particular attention to local house prices and required co-ordinated measures to stabilize them last year, Shanghai's overheated property market is finally losing steam.

The bad news is also obvious. Many of the measures the central government has come up with do not apply everywhere as effectively as in Shanghai. As Shenzhen's case shows, most Chinese cities still prefer to regard the rise of house prices as a natural outcome of rapidly developing local property markets.

Indeed, the real-estate sector's contribution to economic growth is huge. But if house prices are allowed to balloon at a speed most people cannot afford, the risk of pumping more financial resources into this sector will far outweigh the property boom's short-term contribution to local development.

Given the severity of runaway housing prices, the central authorities have kept making new policies to curb speculative property investment. Nevertheless, while working out measures for nationwide application, policy-makers should react more quickly to new problems.

If falling house prices in one city are only replaced by more house price hikes in other parts of the country, the efforts of the central government to ensure healthy development of the real estate sector can hardly work as expected.

(China Daily August 11, 2006)