High housing prices not caused by urbanization

The high housing prices in China are not supported by the country's urbanization, but local governments' strong desires to pay their mounting debt by selling land, said an article in the Southern Metropolis Daily (excerpts below).

Li Tie, an official with the National Development and Reform Commission, said the high housing prices in Chinese cities are not comparable to the real estate bubbles of Japan, and the prices will continue to rise in first and second-tier cities because the real urbanization rate of China just hit about 35.5 percent.

The problem is migrant workers and other new comers to the cities do not have the ability to buy a house in the cities. The government does not provide them with fair social welfare, let alone government-subsidized houses.

Li has turned a blind eye to the fact is China's urbanization is largely a government-motivated urbanization of infrastructure, but not a human-oriented natural process propelled by the development of national economies. So the low urbanization rate cannot be the fundamental cause for the high housing prices, which goes far beyond common wage-earners' affordability.

Li also ignored local governments' mounting debts and their strong motives to transfer land to real estate developers. The area of the land transferred by local governments in the first half of this year is at the same level with the first half of 2011, when local governments rushed to sell land to pay their debts and housing prices surged.