China’s real estate bubble may be getting close to the breaking point, according to some experts. The country’s lightning-fast economic growth has contributed to significant real estate construction and price gains in several emerging cities, but now floundering prices and falling demand indicate a slowdown in the market. As opposed to a crash, however, the softening in the market may lead to stabilization, especially if the government decides to implement controls in an effort to stave off the ill effects of a burst bubble. For more on this continue reading the following article from Global Property Guide.
China has witnessed a property bubble from the year 2005 until a sudden deflation in the year 2011. Now this deflation can be considered as the main reason behind China’s low economy rate. According to recent reports, it has been authentically found that some property glut that has been witnessed in some specific areas of the country might be a major reason behind the future low house booming rate of the country.
The economy is already considered to go through a number of pauses and lows and with this glut; we might say that it would be quite difficult for the country to bounce back in the positive side of property market. People had extensively taken part in property investment in china for the last few years. This has eventually turned the market slow, with people buying too many properties compared to ration than it could be sold. Now, many experts are considering that the market might get cool very quickly and this also places the still firing engines of the present economy in a risky situation.
According to reliable sources, it has been found that the home prices significantly rose to 14.1 percent in the month of July, 2012. Now compared to this, Shanghai had about 13.7 percent. The smaller the cities are the lower is their percentage. Now, the nationalized statistical data are saying that the almost 70 cities of China hold a percentage of about 7.5 in the present year.
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Recently, we heard directly from Rosealea that – "Dozens and dozens of small cities — still home to the majority of China’s urban population — have more housing than they need,” She is one of the leading principal analysts in GaveKal Dragonomics, a reputed consultancy of Beijing. "This excessive supply will put a serious drag on national construction growth for several years."
Development on the Go
If we discuss about the Wenzhou area, then you will know that place had witnessed fallen numbers from the past two years, which once was considered to be a prosperous city. It has suffered through fevered speculations even before the stringent controls had their hold on the property market. Now, according to reports the prices have gone way down by 2.4 percent.
You can consider the prices of Wenzhou to be one of the exceptional cases of the country. There is a very growing probability that the country might suffer hugely due to the slacking economy rate, as a result of some potential property curbs.
The leadership of China is well aware of the current scenario and knows the massive importance of housing in their country’s economy growth. Politburo, said to be the decision making body of the country have taken a pledge to this problem as – "steady and healthy development of the property sector"
The Chief China Strategist, Andy Rothman, who works in CLSA Asia Pacific Markets had to say that "It was a clear signal that there won’t be any new restrictions on home buying in order to temper price increases for a while,"
It has been reported that China might witness a steady economy rate in the coming year and that the inflation rates would come down to a stable figure. For example, Tao Wang, the chief of UBS that is China Economist said that they expect a stable property sector policy in the coming year and see a modest property recovery to continue.
This article was republished with permission from Global Property Guide.