Unlike the United State's housing market China's housing market is viewed as a safe place for investors to put their money. According to this article the income of the Chinese population is on the rise and that is correlating a rise in demand in the housing market. Precautions have been set by the Chinese government in the form of limitations on the amount that banks can loan out for home purchases. I think that this precaution will be very helpful in preventing an economic downfall. According to Bhaskar Chakravorti, an executive director at Tufts University, due to the size of the recent rapid surge( Regional growth of 82% in over 35 Chinese cities) in housing prices, even a 20% drop in prices would be withstand-able for China. In fact, the government saw that the housing market was rising too quickly for their liking so they implemented limitations on lending. So declines in the market are actually welcome by the government, and have also made houses more affordable to a larger population of the Chinese. Due to the limitations that have been implemented by the government, the housing market is forecasted to drop by 20% at the national level, but this will not worry the Chinese government.
2 comments:
The figures in this article are astonishing in how much China is growing and how many citizens are becoming home owners. But this is very similar to America after WWII, the first suburb Levittown, was constructing 36 homes a day and there were massive lines outside everyday for hopeful young Americans to be able to own their first home. Hopefully, China has learned from America's mistake of balloon rates or little down to own a house so their housing market does not crash like ours.
Culture is another important reason that makes the housing market in China a safe place to invest. On the ground of the traditional view of housing in China, people prefer to own a house and have a stable job. At this point, the default rate of the mortgage is lower compared to the rate in other markets. Moreover, in my opinion, the limitations of the housing market are conducive to the market in a long run, although it will result in a drop by 20% in the market. (I believe this is only temporary) It helps to prevent a bubbling market. Moreover, as mentioned in the article, it will make houses more affordable to a larger population.
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