Would a house price fall be socially desirable?

Many people in China are complaining that they cannot afford high house prices at the moment, especially for the young generation. Houses have been a necessity for entering a marriage for people in China because of the culture. The house price issue has been brought up in many important occasions that many social key figures including famous economists and celebrities as well as some important government officials have been publicly discussing the house price issue very often. Because of the wide scale of complains about high house prices, many people do believe it is socially desirable to pull the house prices down. Many governments have used many policies to limit the demands for purchasing houses that they only allow local individuals to purchase a fixed number of houses and put high taxes on purchasing more than one houses.

For many middle class families, they own more than one houses, some may locate in those large cities and have very high values, and some may locate in the small or medium cities and not have very high values. When the house prices fall, this would have significant impacts on these middle class families as their wealth shrinks. In addition, many of them borrow mortgages to purchase houses. Although this will not cause serious problems for banks as the banks only lend a small proportion of the house value to individuals, individuals are less likely to sell their houses because people could expect the house prices will continue to fall.

I have an unmatured idea about how to stabilize the house price and make people more able to purchase houses. Many people in China prefer buying new flats rather than second hand flats. If we are able to make people much easier to sell or buy a second hand flat than to sell or buy a new flat, it is possible to lower the prices for new flats and increase the prices for second hand flats. Moreover, by making people easier to buy or sell a second hand flat, it would increase the demand for old flats and increase the supply for old flats. Then the prices will depend on the scales of the increases in supply and demand. Then it will depend on the economic attractiveness of the cities that if the city is attractive, the demand will always be higher than the supply, and vice versa.

To conclude, the house prices in Beijing, Shanghai, these large cities, are inevitably high, but if we are able to increase the supply of second hand flats by make people easier to borrow to buy second hand flats or other policies, it is possible to lower and stabilize the house prices for small and medium cities.