BLOOMBERG.COM
While problems with China's overheating housing sector are nothing new, the fact that real-estate prices are climbing so fast when wider economic growth is slowing raises a big red flag. In a country where stock markets are underdeveloped and capital is tightly controlled, abundant liquidity injected by previous monetary stimulus has flowed into alternative assets including bonds, commodities, and the housing market. Weak investment appetite due to a slowdown in the real economy has accelerated cash flows into the real-estate market, explain China-watchers. This poses a serious policy conundrum for Beijing. Considering that the real-estate sector makes up about a quarter of the country's GDP, a property meltdown could be disastrous for the world's second-largest economy. The high stakes have prompted the government to introduce new cooling measures to more than 20 cities, mostly top tier cities where property prices have disproportionately rallied in recent months.
Read more>
While problems with China's overheating housing sector are nothing new, the fact that real-estate prices are climbing so fast when wider economic growth is slowing raises a big red flag. In a country where stock markets are underdeveloped and capital is tightly controlled, abundant liquidity injected by previous monetary stimulus has flowed into alternative assets including bonds, commodities, and the housing market. Weak investment appetite due to a slowdown in the real economy has accelerated cash flows into the real-estate market, explain China-watchers. This poses a serious policy conundrum for Beijing. Considering that the real-estate sector makes up about a quarter of the country's GDP, a property meltdown could be disastrous for the world's second-largest economy. The high stakes have prompted the government to introduce new cooling measures to more than 20 cities, mostly top tier cities where property prices have disproportionately rallied in recent months.
Read more>