Yesterday was the renewed deadline set by the Ministry of Construction for local officials to finish construction plans in which homes smaller than 90 square meters must account for at least 70 percent of the total floor space of new property projects.

 

In the face of rising public complaints about rocketing house prices, the construction authorities ostensibly set the limit on the size of houses as a stopgap measure to rein in rising house prices.

 

Unfortunately, there was no news available on how local governments had progressed with this task yesterday. The Ministry of Construction was only reported to have issued a notice asking local governments to complete an annual report on local housing statistics accurately and on time. And the ratio of homes smaller than 90 square meters among new housing projects was supposed to be included in those new statistics to be reported by the end of next January.

 

It would be sad if that meant the deadline had to be reset again.

 

The harsh tone taken by the ministry with local governments late last month still echoes. At that time, the construction authority found that by the end of September, more than 65 percent of prefecture-level cities and 91.1 percent of county-level cities in 10 provincial regions surveyed had not yet published their housing construction plans.

 

That meant most local governments had not taken seriously the central authorities' efforts to curb the excessive growth of property prices. And their reluctance to take action was much related to the unstoppable rise of house prices.

 

The limit on the size of a house unit appeared to be a strange prescription for cooling an overheated real estate sector.

 

Rather than targeting the total price or the per-square-meter price of new houses, the authorities focused on urging property developers to build smaller houses in the belief that paying less for a smaller home is a better deal for the masses.

 

For those who are looking for a small and cheap house, that may sound like good news if the price per square meter does not continue to rise. But the fact that the average size of finished houses for sale stood at 144 square meters in Beijing and above 110 square meters in 40 major Chinese cities this year indicated either the property developers are ignorant of consumer preferences or there is a considerable market demand for large homes in these cities.

 

However, in spite of such concerns over individual consumer preference, the government effort to urge development of smaller houses is still needed to squeeze the property bubble. Because, at the very least, it will increase the number of new houses at the given level of land supply to meet the housing demand of more consumers. And such an increase in supply may help prevent further housing price hikes.

 

If policy-makers are resolved to go against the pricing expectation of homebuyers, they should stick to the adopted measures until they have taken effect.

 

(China Daily December 21, 2006)