Why China’s property market won’t crash for now
  • venynxvenynx July 2018

    According to a latest survey from analysts at global bank BBVA, a 10
    per cent drop in Chinese property prices could cause a 1 per cent
    decline in gross domestic product growth in the short term.To get more china property news,
    you can visit shine news official website. A 15 to 20 per cent property
    price drop could lead to recession, defined as two consecutive quarters
    of negative economic growth. But given the powerful intervention the
    government can exercise on the land, housing and credit markets, a
    crash, adds BBVA is “almost impossible”.

    Beijing, in particular,
    has experienced one of the greatest housing booms ever, according to an
    International Monetary Fund survey, when prices in the capital peaked in
    2016. An updated report released by an International Monetary Fund last
    month showed average home prices in 100 major cities in China rose 16.6
    per cent in September 2016 alone, compared with the year before. Among
    the biggest increases was seen in the southern city of Shenzhen, in
    Guangdong province, regarded as China’s economic powerhouse, and home to
    many of the country’s technology giants including Huawei, ZTE and
    Tencent.House prices there rose to 37 times the average annual net
    income in the city in the first three quarters of 2016, up by a half
    from the same period last year.

    The IMF report said Beijing,
    Shanghai and Shenzhen’s house prices are now comparable to prices in the
    wealthiest western cities such as New York and San Francisco, despite
    the enormous disparity in national incomes. House prices in China, the
    second largest economy in the world, on average have been growing nearly
    twice as fast as national income over the past decade.So the government
    has good reason for wanting to maintain a stable property market – a
    crash in prices could be hugely detrimental to an economy which is
    already slowing. Le Xia, chief Asia economist at BBVA Research, said in
    its study that China’s property market remains closely connected to, and
    highly exposed to, its key economic sectors: local government revenue,
    banks, enterprises and households. Le and his team estimate that a 30
    per cent plunge in property prices would cut local government revenue by
    780 billion yuan (US$122.04 billion), lift non-performing loans to 2.39
    per cent of the total from the current 1.74 per cent within a year,
    wipe 802.5 billion yuan off the value of stocks, and slash aggregate
    household wealth by 46.9 trillion yuan.

    The widespread market
    cooling measures have triggered a slowdown in property sales, and prices
    have declined from that peak in 2016, fitting in with the government’s
    objective of stabilising the market, and preventing any sharp shock. The
    Chinese Academy of Social Sciences, a government think tank, said on
    May 14 it expects China’s property prices to cool steadily this year
    given a series of curbs on buyers and tighter monetary conditions. But
    it also warned that the market will remain volatile. “It is very easy to
    control information on prices and also contain prices by imposing
    freezes on sales [in housing markets],” adds Anne Stevenson-Yang,
    co-founder and research director of US-based J Capital Research.

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