The China Housing Bubble

March 13, 2013
China faces two different housing problems which, with the announcement of new government intervention, will not drag on the economy in China.

You may have noticed that China shares tumbled last Friday because of an announcement regarding new policies to cool down China’s housing market. The new rules affecting home sales include a 20% tax on gains from the sale, higher down payments, higher mortgage rates, and some talk about price targets in various cities. 

There are fears that these new measures will burst the real estate bubble. However, rising housing prices have proven themselves resilient to nine government interventions during the past decade. Ghost cities, empty malls, and empty buildings are well known and documented, and yet prices keep going up as investors feed the frenzy in larger cities where demand for low- to middle-income housing is outstripping supply. 

In contrast, there is a major oversupply problem in smaller cities. This tells us that the bubble appears to have already burst in the smaller cities but not in the major population centers. The government will have to deal with two opposite housing problems simultaneously and a one-size-fits-all solution will not work. I believe the government’s intervention (presented above) and its ability to mobilize capital into the smaller cities will keep this from becoming an economy-killer in China, which is good news for our economy in 2013 as well.

Popular Sponsored Recommendations

How to Build Zero-Cost On-Site Solar and Storage Projects

Nov. 25, 2023
The Inflation Reduction Act offers tax credits, incentives, and financing that enable no-cost projects. In Enel’s eBook, discover the critical role that incentives play in your...

Smarter Savings for Manufacturers - Guide

Sept. 12, 2023
Enhance your service experiences and boost revenue while reducing costs. Learn how one platform can help your business be more agile and productive in today's market.

Smarter Savings for Manufacturers - Guide

Sept. 11, 2023
Boost your manufacturing sales and revenue while reducing costs. Learn how one platform can help your business be more agile and productive in today's market.

3D Printing a More Efficient Factory Floor

Nov. 16, 2023
Today’s additive manufacturing platforms make it simple to print a wide range of high-performing industrial parts as soon as possible and right where you need them — unlocking...

Voice your opinion!

To join the conversation, and become an exclusive member of IndustryWeek, create an account today!