More investment options would check home prices
Updated: 2016-03-17 07:57
By Peter Fuhrman(China Daily)
|
|||||||||
Homebuyers at the sales center of a property project in Nanjing, Jiangsu province, on Feb 29. Cities like Nanjing and Shanghai have announced preferential housing tax policies, which have ignited local enthusiasm for home-buying. [Photo provided to China Daily] |
China's banks, financial regulators, government officials and homeowners can all perhaps breathe easier. Despite surface appearances, China's over-heated property market will not collapse as the US housing sector did in 2008, taking much of the world economy down with it. Yes, there are danger signals in China's enormous real estate industry. China's problems are real and need addressing, but the differences with the United States are large and decisive.
Start with the fact the US housing crash was brought on by lax lending practices, a politically rigged regulatory system and a debt-fueled "buy-and-flip" short-term investment strategy. Another fundamental difference: in the US buying a house with borrowed money is subsidized by the tax code. Not so in China. China also, thankfully, has nothing like the subprime "Ninja Loans"-meaning loans to those with no income, no job, no assets-that were widely available in the US before the crash.
The biggest risk in China is not a US-style tidal wave of failed mortgages that leave families homeless and banks insolvent. Instead, the risk comes from an unbalanced flow of capital into property investment. Too much of China's total savings are now going into this one form of investment. While buying apartments has long been popular, other types of investments-especially in the stock market and in unregulated fixed-income securities-have suffered a big decline in popularity in recent months, with good reason.
The weight of all that additional money flooding into property investment inevitably pushes housing prices up, especially for apartments in major cities. Putting more land on the market for development and building more low-cost housing are both good moves.
But the best way to cool China's housing market both now and for years to come is to have more good and safe alternatives for people to invest in. This will take some time as well as a strengthened regulatory and legal environment. But changes are urgently needed.
Meantime, the government should continue its policy to gradually expand the amount of money Chinese can legally invest in shares and mutual funds outside China.
- Official confident rundown-housing renovation target to be met
- Ministry of housing and urban-rural development holds news conference
- More affordable housing in Inner Mongolia
- CPPCC members suggest different housing policies
- Feverish prices highlight uneven recovery in China's housing sector
- China's housing market recovery patchy
- China raises deposit rate for housing provident fund
- Global health entering new era: WHO chief
- Brazil's planning minister steps aside after recordings revelation
- Vietnam, US adopt joint statement on advancing comprehensive partnership
- European border closures 'inhumane': UN refugee agency
- Japan's foreign minister calls A-bombings extremely regrettable
- Fukushima impact unprecedented for oceans: US expert
- Stars of Lijiang River: Elderly brothers with white beards
- Wealthy Chinese children paying money to learn British manners
- Military-style wedding: Fighter jets, grooms in dashing uniforms
- Striking photos around the world: May 16 - May 22
- Robots help elderly in nursing home in east China
- Hanging in the air: Chongqing holds rescue drill
- 2.1-ton tofu finishes in two hours in central China
- Six things you may not know about Grain Buds
Most Viewed
Editor's Picks
Anti-graft campaign targets poverty relief |
Cherry blossom signal arrival of spring |
In pictures: Destroying fake and shoddy products |
China's southernmost city to plant 500,000 trees |
Cavers make rare finds in Guangxi expedition |
Cutting hair for Longtaitou Festival |
Today's Top News
Liang avoids jail in shooting death
China's finance minister addresses ratings downgrade
Duke alumni visit Chinese Embassy
Marriott unlikely to top Anbang offer for Starwood: Observers
Chinese biopharma debuts on Nasdaq
What ends Jeb Bush's White House hopes
Investigation for Nicolas's campaign
Will US-ASEAN meeting be good for region?
US Weekly
Geared to go |
The place to be |