CHINA'S home prices remain far from reasonable levels, and the government won't relax restrictive policies because that would risk "chaos" in the market, Premier Wen Jiabao said yesterday.
"We are determined to curb speculation in housing and have taken targeted measures, so there is a ray of light among all the difficulties," Wen said at a wide-ranging, three-hour news conference at the end of China's legislative session.
"We can't ease property-control measures. Otherwise, it will wipe out all our previous efforts and may cause chaos in the market ... even drag down the entire economy," Wen said.
He explained that "reasonable" home prices should have a suitable correlation with people's income, and with developers' investment and profit as well.
Purchases of new homes in China saw double-digit declines in both volume and value in the first two months of this year after austerity measures were strictly in place since January 2011. The measures include higher down-payment and mortgage-rate requirements, the imposition of property taxes in Shanghai and Chongqing, and restricting multiple home purchases in nearly 40 cities.
Wen said China's economy requires a sustainable, stable and healthy property market.
"For a populous country with more than 1.3 billion people, while it's in the middle of vast industrialization and urbanization, the huge demand for housing can't be changed and will last for a long time," Wen said. "People shall have their residence, but not necessarily own houses. A broad direction is that people should be encouraged to rent homes," Wen said.
There had been some expectation of loosening property policies after China's economic growth moderated. But Wen's remarks indicated there is no imminent relaxation of cooling measures, at least for the most of this year, said Cui Li, an economist at Royal Bank of Scotland.
Chang Jian, an economist at Barclays Capital, said, "The nation will see a further decline in property prices, especially in major coastal cities."
As for China's reduction of this year's economic growth target to 7.5 percent, Wen said the cut came mainly out of consideration for economic restructuring.
"Our economy should rely more on technology and improved skills among the labor force to achieve a growth of higher quality," he said. "A lowered target can help us to accelerate economic restructuring."