Thursday, April 07, 2016

Why China's Housing Market Refuses To Crash

One of the main reasons that China's real estate market has ultimately maintained stability in the face of regular bouts of seemingly over-inflated prices is that the central and local levels of governments are firmly at the helm. They have control over the supply of new land for construction, financing for development, mortgage policies, tax rates, as well as housing purchasing restrictions that they use like a thermostat to heat up or cool off the market at their discretion.
There is a very good reason for this heavy hand. In China, real estate is responsible for 15% of GDP, 15% of fixed asset investment, 15% of urban employment, and 20% of all bank loans, according to the IMF. This isn't something the government is going to leave to the whims of the free market.

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