Real Estate Bubble in China
Real Estate Bubble in China: the Present and the Future
2011 Q3
HA _S28
0102883578
Introduction:
The concern over whether China is experiencing a real estate bubble has increased, especially after Dubai crisis happened. The construction area of both residential and commercial properties has increased by almost 6 times since year of 2000.
China has enjoyed a sharp increase in property price since 2006. Especially, after 2009, due to the large stimulus package, majority of the money went to construction and real estate industry. It further pushed up the property price, leading to a lot families became the “slave of the property” who were struggled to pay the mortgage. Not only the high price has affected most people‘s lives in China, it could also greatly affect Chinese economy and even the global economy. Domestically, the prosperity of real estate industry is fuelled by local investment and easy band loan. According to MSN Money, there is an increase of 38.2% from 2010 in property market , mainly from developers and speculators. The scale of loans goes to property market is even more scary, up to $1.3 trillion.
People have compared the real estate bubble of China to the United States. The question is will Chinese property bubble has the similar effect? Fortunately, the difference between China and the United States are quite striking. The factors lead to the collapse of property market in United States will unlikely to happen. In China, a country with high saving rate, people used to buy property in cash 4 or 5 years ago. Even in the heyday of residential mortgages, the loan is not as easy as in the U.S. Down payment amount is much higher than in the U.S. A decline of 20 to 30 % in prices will not let the bubble burst in China. In conclusion, the burst of real estate bubble is not easy in China and, if happened, will have limited effect to the world economy.
In this paper, I will try to present the whole picture of Chinese real estate market from the
2011 Q3
HA _S28
0102883578
Introduction:
The concern over whether China is experiencing a real estate bubble has increased, especially after Dubai crisis happened. The construction area of both residential and commercial properties has increased by almost 6 times since year of 2000.
China has enjoyed a sharp increase in property price since 2006. Especially, after 2009, due to the large stimulus package, majority of the money went to construction and real estate industry. It further pushed up the property price, leading to a lot families became the “slave of the property” who were struggled to pay the mortgage. Not only the high price has affected most people‘s lives in China, it could also greatly affect Chinese economy and even the global economy. Domestically, the prosperity of real estate industry is fuelled by local investment and easy band loan. According to MSN Money, there is an increase of 38.2% from 2010 in property market , mainly from developers and speculators. The scale of loans goes to property market is even more scary, up to $1.3 trillion.
People have compared the real estate bubble of China to the United States. The question is will Chinese property bubble has the similar effect? Fortunately, the difference between China and the United States are quite striking. The factors lead to the collapse of property market in United States will unlikely to happen. In China, a country with high saving rate, people used to buy property in cash 4 or 5 years ago. Even in the heyday of residential mortgages, the loan is not as easy as in the U.S. Down payment amount is much higher than in the U.S. A decline of 20 to 30 % in prices will not let the bubble burst in China. In conclusion, the burst of real estate bubble is not easy in China and, if happened, will have limited effect to the world economy.
In this paper, I will try to present the whole picture of Chinese real estate market from the
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