This article discusses the problem of real estate market in China. China is in the middle of a rapidly real estate boom, and property developer states that now people in China want something more luxurious so that expensive estate has no trouble finding buyers.
However, it is also clear that Chinese real estate market is in a growing bubble and if it collapsed, the world economy would be impacted, as China is a main economy pulling the world out of recession. Beijing is concerned and have recently moved to rein in the easy credit that has helped finance China’s hyperdevelopment, including making it more difficult for home buyers to take out a second mortgage.
Last year, a record $560 billion of residential property was sold in China, an increase of 80 percent from the year before, according to government statistics that are widely considered reliable. Yet analyst still warns that the sign of exuberance is just a bubble. It is also predicted that the prices will continue to rise, as prices have nearly every year for more than a decade.
A possible reason for the problem of high price in real estate market may be the government. As they try to modulate the market, local and central governments here are walking a thin line. Land sales were a major source of government revenue, raising about $234 billion last year, an amount equal to over a third of the cost of China’s half-trillion-dollar stimulus program.
Whether the country is in the middle of a bubble has become the subject of a debate. Some economists, like Nicholas R. Lardy at the Peterson Institute for International Economics in Washington, say the housing boom is being propelled by a huge urbanization push that is creating premium-priced houses.
Other analysts say prices are being propped up by greedy developers and government policies that are making housing increasingly unaffordable for the masses migrating to big cities.
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