China Housing Bubble Overblown
- Author Dezan Shira
- Published February 5, 2011
- Word count 373
A new IMF working paper titled "Are House Prices Rising Too Fast in China?" has declared that housing prices in China are not entirely out of line and fears of a housing bubble are exaggerated.
The paper, however, does indicate that certain regions have seen dramatic increases in the value of homes that are not sustainable, particularly in the luxury segment. Examples of cities where prices can be seen as out of line with fundamentals are Shanghai, Shenzhen, Beijing and Nanjing.
The most commonly cited indicator used to argue against the sustainability of housing prices is the price-to-rent ratio, which shows that the cost of purchasing a house generally outpaces the cost to rent the same home. However, the paper suggests that overall price discrepancies tend to self-correct frequently and misalignments are relatively short lived when compared to other countries with similar growth in their housing markets. Additionally, as the housing market in China is still relatively young, it is not necessarily surprising or worrisome that housing costs may be disassociated from rents. Without a larger amount of time for analysis, the price-to-rent ratio is not a reliable tool.
"Overall…while prices have run ahead of fundamentals in some market segments, nationally this does not seem to be the case," the researchers stated in the report.
The policies that the Chinese government have taken to cool growth in the real estate market do appear to have had a meaningful impact and the gaps between fundamentals and implied prices have shrunk in some cities, with the exception of the more affluent coastal cities.
The paper suggests that the government take further action to ensure that the market corrections are lasting and not simply a transient phase. To fully augment the underlying structural causes of real-estate inflation, the government should continue to increase interest rates, increase the carrying cost of home-ownership through a significant property tax, and further develop the financial markets as an alternative to real estate speculation.
The researchers make sure to note that while they do not see evidence of significant and broad-based overvaluation in property prices today, it may take time for the imbalances to be clearly revealed and the government must be proactive and not merely react to rising prices.
This article was written for China-Briefing.com, which was created by Chris Devonshire-Ellis. Chris Devonshire-Ellis also created China Expat, 2point6billion.com and Asia Briefing sites.
Article source: https://articlebiz.comRate article
Article comments
There are no posted comments.
Related articles
- Top 10 Online Tools Every Student Needs in 2025
- What Are the Benefits of 24/7 Home Health Care in Mobile, AL? Trusted Services by First Watch Home Care
- How to Choose the Best Real Estate Drone Videography Service in CA
- Strategies for building a positive workplace culture in 2025
- From Dubai Airport smugglers to Gordon Ramsay's kitchen - one of TV's top directors reveals all in our exclusive Q&A
- Red Flags to Watch for When Dating Over 40
- Why Commercial Gutter Cleaning is Essential for Your Business – And Who You Should Trust in Essex
- The Rise of Software to Monitor Employee Computer Activity: Balancing Productivity, Privacy, and Ethics
- NOSEBLEEDS, NEIGHBOURS, AND NEW YORK: HEIDI'S ARTISTIC RESURRECTION
- Top-Tier Real Estate Videography in NV: Boost Your Sales with Stunning Visuals
- Find In-Home Senior Care Services Near You in Alabama: Expert Respite, Personal, and Dementia Care Solutions
- Elevate Your Entryway with a Statement Wall: Carved Wood Panels
- What Are the Comprehensive Senior Home Care Services in Prichard, AL for Trusted Respite and Dementia Care?
- Electronic Document Management System: Efficiency and Challenges in the Digital Age
- Best Air Conditioning Repair Service Queen Creek Florence Arizona
- How to Choose an Airport Transfer Service: A Guide for Stress-Free Travel
- Wirral Private Airport Transfers: Comfort, Convenience, and Class
- North Wirral Airport Transfers by Ventus: Trusted Travel from Coast to Terminal
- The Importance of Reliable Airport Transfer Services
- Find the Perfect Fireplace for Your Home
- The Pros, Cons, and Ethical Dilemmas of Employee Computer Activity Monitoring Software
- Over 40 and Ready to Mingle? Why Now Is the Best Time to Start Dating Again
- Whu buy an apartment in Manilva
- Best Electric Humidor: Top Picks for Effortless Cigar Storage in 2025
- They Tried Magic Mushrooms for Mental Health
- Sacred Balance: 5 Elements Chakra Healing with Mala Beads & Yantras
- Rooted in Heritage: The Rich Ranch Aesthetic with Antique Doors and Rustic Soul
- Carved Floral Barn Doors: A Shabby Chic Statement for Your Pantry & Laundry Room
- Confusion and Anxiety: Lincoln and the Days Before the Civil War
- How Website Maintenance & Security Protects Your Online Presence