China Housing Market Continues to Boom

On the surface, the price appreciation is a simple product of supply-and-demand dynamics. Chinese developers slowed their pace of construction over the past two years as financing became more expensive and the economy weakened, so the supply of new homes coming on to the market has leveled off. But the number of people looking to buy homes, especially in China’s biggest cities, has continued to expand. Housing transactions in the first eight months of 2013 rose 23.4 percent year on year.

Beneath the surface of this supply-and-demand picture are the vagaries of government policy. “The government wants to control housing prices, but the property market is the biggest bright spot of the Chinese economy. It worries about taking actions that slow real estate investment, and it’s very difficult to strike a balance,” said Yin Zhongli, a researcher with the Chinese Academy of Social Sciences.

The Chinese government’s stimulus spending during the global financial crisis stoked a huge jump in housing prices and since 2010 it has waged a continuous battle to rein them in. It has raised mandatory mortgage down payments, blocked banks from lending to developers, restricted the number of homes people can buy and increased the tax on housing sales.

via CNBC

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