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.

About the Author

Alan Beaulieu Blog | President

One of the country’s most informed economists, Alan Beaulieu is a principal of the ITR Economics where he serves as President. ITR predicts future economic trends with 94.7% accuracy rate and 60 years of correct calls. In his keynotes, Alan delivers clear, comprehensive action plans and tools for capitalizing on business cycle fluctuations and outperforming your competition--whether the economy is moving up, down, or in a recession.

Since 1990, he has been consulting with companies throughout the US, Europe, and Asia on how to forecast, plan, and increase their profits based on business cycle trend analysis. Alan is also the Senior Economic Advisor to NAW, Contributing Editor for INDUSTRYWEEK, and the Chief Economist for HARDI.

Alan is co-author, along with his brother Brian, of the book MAKE YOUR MOVE, and has written numerous articles on economic analysis. He makes up to 150 appearances each year, and his keynotes and seminars have helped thousands of business owners and executives capitalize on emerging trends. 

Prior to joining ITR Economics, Alan was a principal in a steel fabrication company and also in a software development company.

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