Nothing’s fair for the home buyer

The four-day Shanghai Spring Real Estate Market concluded on Sunday with most home buyers apparently adopting a wait-and-see approach. This was the 14th annual fair and it has become an indicator of the city's real estate market.

Most of the 200 projects showcased at the fair by real estate firms from all over the country were located abroad or outside the city. Fewer than 10 were local and none of these was set in a downtown Shanghai location.

Absent were property tycoons like Vanke, Poly, China Merchants Property and Greenland. Analysts suggested these big developers were cutting spending in a climate of tight liquidity.

According to the organizers, the fair saw 250 million yuan ($40 million) in transactions. The figures were down from last year.

The fair opened just after Chinese Premier Wen Jiabao had announced that the central government would not loosen restrictions on the property market because house prices were far from reasonable, far from an amount that related to an ordinary person's disposable income.

Last year, Shanghai's annual disposable income was an average 36,230 yuan per head. Based on this, the "reasonable" price for a house in the city should be around 5,734 yuan per square meter.

But real estate developers will always try to raise a "reasonable" price. Sales staff at the fair were making every effort to promote their projects to ensure that their profits would not be affected.

Most developers were offering some properties with a 20 percent discount. But if you looked carefully, the original prices had been inflated or the properties were larger than necessary. There were few genuine bargains on offer.

Although there were a lot of visitors to the fair at the weekend, most were just looking before taking the next step. The biggest queues were for the free gifts some developers offered visitors who registered.

It is time for the authorities to step in. The government should wean itself from its fiscal reliance on the heavy land transfer fees paid by developers. This constitutes a large portion of the income for many mainland cities, especially Shanghai and Beijing.

The sky-rocketing fees for land transfers have always been one of the basic reasons why China's house prices have climbed like crazy over the past few years. It has become a vicious circle with home buyers having to shoulder the costs for the land which developers bought from governments.

Second, city authorities should focus on providing affordable housing for ordinary people - those lacking the huge cash resources needed to buy their own apartments. Even though Shanghai is building several affordable housing projects on the outskirts of the city, this kind of project should be linked to new property developments like the ones at the fair.

By setting a ratio, city governments can then demand that developers wanting to build a major residential project with high-end apartments should also have to provide a number of affordable homes at the same time. If developers provide more than the pre-determined level, they can be rewarded.

Another way to crack down on property speculation could be to establish a nationwide database of property ownership so that property tax and real estate restrictions can be administered fairly and openly.