Opinion / Xin Zhiming

Will bail-out policies save the property sector?

By Xin Zhiming (chinadaily.com.cn) Updated: 2014-05-13 14:39

Unlike in 2008, the home prices now have soared to a level that is hardly affordable to ordinary wage earners. In some major cities, prices have been about ten times higher than 10 years ago.

China’s development is highly unbalanced and the rich people nationwide would like to buy their assets in major cities, such as Beijing and Shanghai, making it hard for markets in those cities to have a correction. Still, the market seems to be getting saturated, as is shown in stalling sales.

The stalling sales, in other words, are not resulted from a psychological shock (as in the 2008 crisis), but from a real purchasing power crunch.

The government’s bail-out, therefore, may work temporarily, but in the middle and long term, consumers would still feel financially difficult to afford the expensive housing.

China’s real estate sector has powered ahead for 10 years without suffering from major corrections. This time, the menace of a bubble bust is real and imminent.

It is hard to fathom out how deep the corrections would be. But the possibility is high that there would be substantial corrections.

For the local governments, it is almost impossible for them to sit idle since the local coffers are largely built on tax revenues that are closely related with the property market and financing that is mostly guaranteed by property projects. Therefore, we could see more cities follow suit and launch stimulus policies to boost the property market.

Those measures, however, would only postpone the happening of market corrections.

 

Previous Page 1 2 Next Page

Most Viewed Today's Top News
New type of urbanization is in the details
...