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Market soars on speculation
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HOUSING prices recently soared in Baoding City, Hebei Province, simply because speculators had learned the city planned to absorb some administrative organizations moving from over-crowded nearby Beijing.
People’s Daily reported on Wednesday that housing prices in some parts of Baoding had spiraled to 7,000 yuan (US$1,130) from 5,000 yuan per square meter in just a couple of days. Prices of certain real estate projects in the city increased by the day.
The newspaper quoted experts who attributed the sudden upward spiral of housing prices, in otherwise underdeveloped Baoding, to three factors: commercial speculation by developers; irrational expectations from buyers; ambiguous government policies.
Indeed, how could prices rocket before the government announced which and how many administrative organizations were likely to move from Beijing to Baoding? Only one document released recently by the provincial government said Baoding would have an enlarged administrative sector since it would resettle some government offices. Details have not been announced.
The lack of clear government policies is mainly to blame for the irrational spiral of housing prices in Baoding. After all, markets are prone to be irrational, because information is asymmetric. The government should not release vague statements that will only give rise to speculation.
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