Social Mood: Frequent Housing Policy Changes Eroding Public Trust

A sign of the social mood in China, here's a hot take on recent government reversals on buying restrictions. It goes so far as to warn government credibility is at risk of becoming a joke:

However, the premise is to fully demonstrate, investigate, revere the market, revere the interests of the public, and not let the credibility of the government become a joke.
iFeng: 取消住房限售又收回,“朝令夕改”影响公信
Sogou: "Cancellation of Housing Sales Restriction" and Withdrawal, "Changing Orders" Affect Public Trust
On July 20, the official website of the Kaifeng municipal government in Henan province issued the "decision of the municipal housing and construction bureau to revoke its decision to adjust the trading time limit for newly purchased commercial housing and to revoke the filing restrictions", deciding not to cancel the three-year sales order for commercial housing. This is only three days after the previous policy was released.

Within 3 days, the policy was withdrawn after it was released. The speed of policy changes in Kaifeng's real estate market surprised the outside world. This "change from day to night" also brings great confusion to buyers and developers.

The Kaifeng authorities certainly have their "difficulties" in bringing about such a result. Since 2017, when Kaifeng issued the "strictest sales restriction order", the tide of foreign real estate speculation funds has ebbed and Kaifeng's rapidly rising housing prices have been curbed. However, at the same time, Kaifeng's property market is also under increasing downward pressure.

According to the official website data of Kaifeng Municipal Bureau of Statistics, in 2018, Kaifeng's real estate development investment (including Lankao) was 24.084 billion yuan, down 12.1% from the same period last year. From January to May 2019, Kaifeng's real estate business income fell 2.7% from the same period last year. Since 2018, Kaifeng has taken 7 land auctions. It is more and more common for developers to offer discounts under various names. Such a gloomy situation not only impacts the local economy, but also has a great impact on the government's fiscal revenue.

This is why Kaifeng took the initiative to lift the sales restriction. However, such a decision seems to be a bit hasty. For example, Kaifeng Housing and Construction Bureau said that "insufficient market research and demonstration have not been carried out, and there is a lack of sufficient pre-judgment and assessment of the possible market impact".

Looking at the whole process of Kaifeng's "cancellation of housing sales restriction" and its recovery, I have to say that the local government is too casual and hasty in formulating policies on the real estate market. Kaifeng's "sales restriction order" has been implemented for 3 years. The "sales restriction order" not only allows the house price to run smoothly, but also gives the local people a stable expectation. The cancellation of the "sales restriction order" will inevitably bring about an impact on the market and the public's psychology, all of which can be predicted and deduced.

The huge economic and social costs brought about by the short-lived decision are incalculable, and will cause certain damage to the credibility of the government. Real estate is a large asset of the public. Changes in real estate market policies affect the vital interests of thousands of households. Therefore, the formulation of the real estate policy should be extremely cautious. The introduction of any policy should not be a "surprise attack" style, allowing people to accept it passively, but should fully listen to people's opinions and reach the greatest consensus. Similarly, the cancellation of a policy should be the same. It must first be submitted to the public for full discussion. This is also the proper meaning of "let the people know the important situation and let the people discuss the important decisions".

Unfortunately, it is precisely in real estate, which involves the most important interests of the public, that changes in relevant policies are quite frequent, and "surprise attacks" have become the norm. Similar to the "policy of one-day tour" which was cancelled and withdrawn, there have been many cases before. For example, in 2011, Foshan untied and restricted the purchase, resulting in a premature death in half a day. In 2018, Hengyang announced the cancellation of the price limit, but the new policy was stillborn before it was formally implemented. In many places, from the introduction of purchase restrictions, to the increase of prices, and then to the cancellation, the market was caught off guard time and again, leaving the public at a loss.

At present, the concept of "no room for speculation" is deeply rooted in the hearts of the people. The most important thing is to ensure the continuity and stability of the real estate market policy. In other words, the real estate policy should be long-term and continuous and should not change overnight. If the policy is stable, the market will naturally be stable, the public expectation will naturally be stable, and the real estate market will naturally gradually move out of the atmosphere of speculation and speculation.

In this regard, it is not only Kaifeng that needs to learn lessons from the "cancellation of housing sales restrictions" and its withdrawal. Other places should also take this case as an important lesson. Changing from one day to the next is a big taboo for the rule of law. Any government decision must be serious. It is not impossible to restrict or cancel the purchase. However, the premise is to fully demonstrate, investigate, revere the market, revere the interests of the public, and not let the credibility of the government become a joke.