Thursday, April 2, 2015

China Acts to Stem Slide in Home Prices

We discussed in class on Tuesday that during the financial crisis China was booming compared to the rest of the world and has just recently been seeing a slowdown in economic growth. This article from The New York Times seemed particularly relevant because it deals with the declining prices of homes in China (article link here). 

During 2007, the housing sector and more specifically the housing price bubble, was one of the causes of the financial crisis. Housing prices in the United States had been rising steadily for many years and then began to rapidly decline when the bubble finally burst. 

China had similarly been experiencing increasing housing prices during recent years but has begun to see a decline in home prices. There has been growing concern that the decline in prices will prevent China from reaching a continual growth of 7%. In order to prevent the housing market from plummeting the Chinese government and central bank, known as the People's Bank of China, have been taking steps to stop the decline in prices. 


"China on Monday courted home buyers with a bigger tax break as it cut down-payment requirements for the second time in six months, stepping up a fight against sliding house prices that is imperiling the Chinese economy. The People’s Bank of China, the central bank, said on its website that commercial banks could now lower their minimum down-payment requirement for buyers of second homes, and with outstanding mortgages, to 40 percent from 60 percent."

  It will be interesting to continue to watch the housing market in China to see whether these measures do in fact help stop the decline in prices. If not, China may have to continue to try other options to prevent decline or experience a decline in desired growth at the hands of the housing market.

5 comments:

  1. This is a sweet article! It's interesting to see that China's economy is dealing with a similar housing issue that the United States had to deal with during 2008 housing crisis. Before reading this article I was unaware of this housing price issue in China and it is interesting to see another powerful world economy dealing with a similar housing issue. I'm curious if China will be able to get a handle on this issue to keep its 7% growth trend.

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  2. This article is definitely interesting. As we talked about in class, China was not affected by the recession like the US and Europe were. This is largely due to the fact that, comparatively, China's economy was less developed and highly industrial as opposed to financial. However, it is interesting to note that while China's economy has become one of the biggest in the world and is continually developing the country is starting to experience problems that were present in the US's economy. Hopefully China can look at the experiences of 2008 to prevent its housing bubble from bursting and leading to economic downfall.

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  3. It is unbelievable to see that China, a country known for its explosive GDP growth is finally slowing down after nearly two decades of rapid growth! From studying abroad in China, I can say from personal experience that China is truly remarkable. You can definitely tell that the country is still developing yet there is a huge income inequality. I am curious to see whether the Chinese government will be able to prevent the housing bubble from bursting.

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  4. The housing problem in China has been going on for a while. I even thought that the Chinese government has seized the issue of rising property prices. I read an article on the issue in 2013. The article said that since 2010, measures have been put in place to vocation restriction on the purchase of a second and a third housing by individuals, an increase in the personal contribution for credit as well as the establishment of property tax in some Chinese cities.
    The real estate market represents a very large part of the Chinese economy and real estate in China is both an economic issue and a social issue : two closely related aspects that currently appear to penalize each other. Hopefully, the Chinese government will be able to avoid the worst.

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  5. It'll be interesting to see how this ends up playing out in China. Also, I can understand they'd be worried if their GDP growth dropped below 7%, but even if it dipped below that point, that'd still be a massive growth, considering the size of the country.

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