During the just-ended session of the National People's Congress, Premier Wen Jiabao raised several targets for the government to hit in controlling the overheated property sector.

His latest remarks emphasized raising the supply of property, stabilizing property prices and developing reasonably priced commercial housing for ordinary people.

The stress on increasing the property supply as the fix for property prices is a remarkable policy shift.

The State has obviously realized that the single-handed measure of curbing property prices does not work well. Instead, a rise in supply will probably ease the momentum of rocketing property prices.

Such a shift will prevail in the macro control over housing estates for quite some time. The shift acknowledges that the country has a strong demand for housing.

Boosting the property supply is a good resolution to the problems troubling the estate market. Yet, the land for housing development has become increasingly scarce, especially in big cities.

A practical solution to significantly boost the housing supply is to stimulate the sale of previously owned houses. Arrangements should be made to facilitate such transactions by lowering commissions, taxes and related fees.

Another important approach for raising the housing supply is to break up the monopoly in the real estate markets by encouraging developers of various business types.

Controlled by local government, land is the most important factor in property development. As the demand for property increases, land has become the source of big money for localities after they sell the land to commercial developers at high prices.

In fact, a city's property price has been seen to increase by at least several percentage points once commercial estate developers enter the local market. Price increases have been especially high in mid-sized cities and provincial capitals in central and western China.

Another obstacle to slowing the rise in estate prices is the monopoly by commercial developers. The authorities should allow individuals or companies to build non-commercial housing projects as long as they are properly qualified.

It is an important condition for creating a housing supply adapted to the needs of different social groups.

Commercial developers build luxury houses for the rich at market price. Qualified enterprises provide affordable housing for their employees at cost. The government builds low-rent houses or low-priced houses for low-income earners.

There are individuals trying to work with other individuals or companies to build their own housing, but few of them are blessed with the support of local governments.

Many local officials do not want to see successful housing projects launched by individuals because these projects are not profit-orientated and do not contribute to the local GDP as much as commercial housing projects.

To help eliminate these obstacles, the central government should revise current policies providing incentives for local officials.

As a matter of fact, the ultimate goal behind all the moves to cool property prices is to enable most, if not all, people to afford homes.

It is actually an impossible mission.

In the Hong Kong Special Administration Region of China and in Singapore, there are government policies to help residents get housing. Yet, these schemes are never meant to provide everyone with a home at a low price. Instead, the Hong Kong and Singapore governments offer apartments for residents to rent or buy.

These policies are often misunderstood by many on the Chinese mainland, interpreting them as "every resident should own a house". It is an unrealistic target in a market economy. The government cannot force any businesses to drop their pursuit of profits for the sake of maintaining social fairness.

The government should not target its housing policy at lowering the property price to the level that every citizen can afford a house. Rather, it should pay more attention to the public policies related to estate development and try its best to offer diversified properties to different groups.

Another important part of this effort is that government at all levels should no longer regard the development of the property sector as the primary engine for economic growth.

Many localities are hesitant to implement the measures to cool housing prices because they contribute significantly to GDP growth. When the central government no longer positions the estates as a backbone industry in economic growth, local officials will drop their concerns about the real estate industry's contribution to GDP growth and make substantial efforts to stop the ongoing surge of housing prices.

The author is a senior economist with the State Information Center

(China Daily March 22, 2007)