Responding to the recent frenetic rise in housing prices, the central government in January announced the "new eight points of State Council regulation", showing its determination to cool down the real estate market.

Consequently, up to 17 cities have promulgated restriction orders for homebuyers. The most stringent requirements are that of the Beijing municipal government. People who do not have local hukou, or household registration, have to furnish evidence of paying taxes to the city tax department for the last five years to qualify as homebuyers.

It seems that the Beijing government is trying everything to cool down the property market. Playing the role of an internal "passport", the hukou rule was initially promulgated to prevent "blind flow" of farmers into cities.

As a result, the State could "economize" the cost of urban development, namely saving the cost of housing provision and other subsidies to food and agricultural products provided to urban hukou holders.

Now, hukou is being used to prevent the inflow of real estate-buying capital from heating up the housing market.

This measure will definitely reduce the demand for property and may even bring down housing prices in the short term. In fact, there is some evidence to show that a few property agents went bankrupt because of a sudden decline in the number of customers. But in the long term, the policy will have limited effect on the property market, because the real estate boom has essentially been driven by the structural dynamics of the Chinese economy.

China has seen the accumulation of surplus capital which has become the source of investment in properties, and city governments depend heavily on property development as an important source of their revenue, a phenomenon that can be attributed to tudi caizheng (land-centered local fiscal regime).

People may rebuff this restriction order because it could be detrimental to social integration and even discriminative to migrants. But this is not the point. The policy is irrelevant to rural migrant workers, most of who cannot afford housing in cities anyway. The commodity housing market is not designed for them; they cannot furnish evidence of paying tax in a city because many of them work in the informal sector, a fact that will not change in the foreseeable future.

The policy targets mainly "speculative" buyers in the upper or mainstream housing market. But the real side effect is that it could hamper laborers' mobility when the flow of people, as a result of the labor market's development, is essential to the vitality of the urban economy. The new policy means newcomers will have to live in (private) rented houses for at least five years.