Chinese Housing Market

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China Real Estate Policy Influence and Prediction
In the past 20 years, China’s real estate industry has gradually become one of the leading industries and has an increasingly important position in China’s economic development. At the same time, the real estate industry is also a source that causes an overheated economy in which economic productive capacity is unable to keep pace with growing aggregate demand. It has become one of the key industries, though it is in need of government intervention. In recent years, it is obvious that the housing prices in different cities in China continue to increase. For many buyers, a house is not a place to live, but is merchandise that can bring huge profit and is worth investing in. As a result of this over-investment, more and more people who really need houses to live in cannot afford to buy houses. The inflated housing prices bring a lot of social problems, the primary one being class conflicts. The Chinese government has already realized the problem and every year it comes out with some relevant policies to stop house prices increasing, such as increasing loan interests for buying a house, tightening mortgage limits of house loan, and shortening the installment time limits in order to discourage investment in housing. Even so, the housing price problem still is not solved. In my paper, I identify what caused the Chinese housing prices to become artificially inflated. I use my research sources to explain why some of government policies have failed and some are effective. Finally, I am going to make a prediction about the influences of new policies as well. Recently, some experts, such as Jiaowei Shang, have pointed out the principle reason for these higher housing prices – government, especially the local government relies heavily on building industry (Davis 2). In the background of the world economic crisis, Chinese real estate is responsible for stimulating domestic demand, resisting the impact of the economic crisis, and maintaining economic growth. China's housing problem, essentially, is a problem of the economic system. In China, the easiest, and the most effortless way to gain profits is to invest in real estate. Chinese government holds all the resources, including land, finance, tax, and policy. So governments at all levels are the promoters and beneficiaries of the development of real estate. For local governments, the easiest government income is from increasing taxes. The development of real estate creates huge taxes, so those local governments support it. The central government focuses on GDP, and real estate leads to GDP growth, so central government permits economic policy shift to real estate industry. The more capital that is put into the real estate industry, the more serious the consequences are that government must face. Now, Chinese government has to admit that the real estate industry develops abnormally, and the increasing housing prices are no longer under control (Luhby 2). The increasing house price cause several social problems. The most important one is social stability problem. The majority of people who want to buy a house in order to meet the minimum needs of life, they need a house to live. When people in lower classes cannot afford to buy a house, it will cause their dissatisfaction about the society. Since the fourth quarter of 2008, the Chinese State Council and its ministries have repeatedly published house price control measures, including bank credit, sale and purchase of land, housing supply, and market supervision. On April 17, 2010, the central government issued “the Notice to Limit the Rising Housing Prices in Some Cities” that published by the State Council (“the National Ten” for short) (Xiao & Xie 17). This is a comprehensive exposition of government regulatory policies. Focusing on the National Ten, I highlight the specific content of the current real estate regulation and its influence in four aspects: regulation goals, credit...
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