News / Asia

China Attempts to Cool Hot Property Market

Multimedia

China's growing economy attracts millions to the cities, fueling a housing boom and encouraging property speculation.

China's biggest cities are littered with construction sites and housing prices have skyrocketed: in some areas they have doubled in the past year, raising concerns the bubble could burst, damaging the whole economy.

To prepare for a worst-case scenario, the government ordered banks to test how a 60 percent drop in property prices would hit their balance sheets.

China's property market is highly interconnected with economic growth and the government recognizes the risks, said Bei Fu, a property sector expert at investment ratings agency Standard and Poors.

"That's why they have been quite proactive in controlling the market for this round of correction. Last year since second quarter of '09 the market started to rebound really strong. And, around fourth quarter the government already came out to have all these measures in place. And, so they keep pushing out measures gradually up to this April," said Bei Fu.

If the property market tumbled, it could leave China's banks with vast amounts of bad loans, as happened in the United States and Europe in 2008.  Additionally, as in the U.S. and other countries, if property sales slump, demand for consumer goods such as furniture and appliances could fall, hurting factories and retailers.

Beijing is limiting bank loans and has told state-owned companies to rein in property speculation.

But home prices remain high, especially for young adults like Shao Waner, who said it is better to rent until she has a strong, fixed economic base to purchase a home.  Shao Waner said she will reassess the housing market at the end of the year.  

Property analysts expect prices to drop by at least 10 percent this year because of the government's efforts to cool the market. But, many say creating a stable property market over the long term requires structural reforms such as an ownership tax.

China taxes property sales and rents, but not ownership. That encourages a glut of empty apartments and office buildings. All over the country, there are new buildings that stand half-full.

Vice president of marketing for the Wo Ai Wo Jia real estate agency Hu Jingjun thinks ownership taxes would get properties onto the market faster and help stabilize prices.  He said no matter much property is owned, no taxes are paid.  He described the current system as a big gap between China and many developed countries and mature markets.

Still, other real estate analysts say the outlook for China's property market is not entirely bleak.

Incomes here are rising quickly, especially in the cities, but most people have few investment avenues for their savings. They see buying an apartment as a good hedge against inflation.  

What is more, millions of rural residents hope to move to the cities where pay is better and they will need places to live. Analysts say the question is whether incomes can keep up with property prices.

You May Like

China Investigates Former Powerful Security Chief

Former security chief and member of Politburo Standing Committee, Zhou Yongkang, under investigation for suspected 'serious disciplinary violation' More

India, US Look to Reset Ties During Kerry Visit

This week's talks will be first high level interaction between two countries since Prime Minister Narendra Modi took charge More

Video Young African Leadership Program Renamed to Honor Mandela

YALI program, launched by President Obama in 2010, aims to build skills in business, entrepreneurship, public management and civic leadership More

This forum has been closed.
Comments
     
There are no comments in this forum. Be first and add one

Featured Videos

Your JavaScript is turned off or you have an old version of Adobe's Flash Player. Get the latest Flash player.
Vietnamese Staging Chinese Product Boycott After Oil Rig Spati
X
Reasey Poch
July 28, 2014 7:18 PM
China recently pulled an oil rig from an area of the disputed South China Sea that Vietnam also claims. Despite the action, the incident has had a lingering effect on consumers in Vietnam. VOA's Reasey Poch reports from Hanoi on an effort to boycott Chinese products.
Video

Video Vietnamese Staging Chinese Product Boycott After Oil Rig Spat

China recently pulled an oil rig from an area of the disputed South China Sea that Vietnam also claims. Despite the action, the incident has had a lingering effect on consumers in Vietnam. VOA's Reasey Poch reports from Hanoi on an effort to boycott Chinese products.
Video

Video ESA Spacecraft to Land on a Comet

After a long flight through deep space, a European Space Agency probe is finally approaching its target -- a comet millions of kilometers away from earth. Scientists say the mission may lead to some startling discoveries about the origins of the water on earth. VOA’s George Putic has more.
Video

Video Young Africans Arrive in US for Leadership Program

President Barack Obama's Young African Leadership Initiative has brought hundreds of young Africans to the United States for a six-week program aimed at building their knowledge and skills in fields such as public administration and business. Out of the 50,000 young Africans who applied for the program, just one percent was accepted. VOA's Laurel Bowman caught up with some of those who made the cut and has this report.
Video

Video In Honduras, Amnesty Rumors Fuel US Migration Surges

False rumors in Central America are fueling the current surge of undocumented young people being apprehended at the U.S. border. The inaccurate claims suggest the U.S. will give amnesty to young migrants from the region. As VOA's Brian Padden reports from Honduras, these rumors trace back to President Obama's 2012 executive order to halt deportations for some young undocumented immigrants already living in the United States.
Video

Video Students in Business for Themselves

They're only high school students, but they are making accessories for shoes, fabricating backpacks and doing product photography - all through their own businesses. It's the result of a partnership between a non-profit organization that teaches entrepreneurship and their schools. VOA's Mike O'Sullivan and Deyane Moses met the budding entrepreneurs near Los Angeles.
Video

Video Astronauts Train in Underwater Lab

In the world’s only underwater laboratory, four U.S. astronauts train for a planned visit to an asteroid. The lab - called Aquarius- is located five kilometers off Key Largo, in southern Florida. Living in close quarters and making excursions only into the surrounding ocean, they try to simulate the daily routine of a crew that will someday travel to collect samples of a rock orbiting far away from earth. VOA’s George Putic has more.

AppleAndroid