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CHINA


GREAT STALL OF CHINA E


Bubble and creak of People’s Republic housing market


conomic forecasters around the world are maintaining a nervous watching brief on China’s ominous housing bubble to see if the country


can succeed where the US failed, and avoid the kind of meltdown that triggered the global financial crisis. Te possible spin-offs for the Gulf are immense as China is considered one of the safest places for GCC countries to invest and experts say the People’s Republic will be the Arab nations’ most important trading partner by 2020. But to avoid a crash akin to that in the US, China is making efforts to cool


the overheated property sector which has seen average home prices across 100 mainland cities fall five months in a row. Te average cost of a home in the Shanghai metropolitan area has


plunged roughly 40 per cent since peaking in 2009 and home prices in major Chinese cities are expected to fall up to an additional 20 per cent this year, according to a report in the South China Morning Post English- language daily.


Unlike the US housing meltdown, there is method rather than madness in China’s correction. From the spring of last year, Beijing introduced a number of measures to put the brakes on home prices. Tey included tightening lending standards, hiking interest rates, requiring larger down payments, raising taxes in some cities, and discouraging speculation by barring home buyers from buying more than two properties. While that’s straight-forward enough, the impact in China and on the global economy is less certain. Falling property prices in China undercuts consumer spending and weakens demand for foreign goods. China’s building boom in recent decades is also a major contributor to the


increase in the price of oil, steel, and other commodities. But Chinese consumers typically also carry much less debt than


borrowers in the West. “I don’t think China is in danger of a US-style housing crash,” said Alistair Tornton, a Beijing-based analyst for IHS Global Insight. “Tey still retain a lot


Tree months ago, Shanghai property developers started slashing prices on their latest luxury condos by up to one-third. Crowds of owners who bought apartments at full price converged on sales offices throughout the city, demanding refunds. Some angry investors went on a rampage, breaking windows and smashing showrooms.


20 I CITYSCAPE I APRIL 2012


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