China’s economy is not under threat of a bursting property bubble, says Shaun Rein in CNBC. Property is being sold to people who can afford those assets, and can even stand a severe drop in value, unlike home owners in the US.
What has happened in the 8 months …? Housing prices have risen 30 percent while sales volumes have dropped 70 percent. In other words, people buying homes can afford them. There is no panic selling like in the US or Dubai because rules in place for years have prevented the kind of speculation that was rampant in America, where people bought multiple homes with zero down.
Restrictions have actually gotten stricter and have kept buyers on the sidelines. In Shanghai, third home purchases are no longer allowed, and non-Beijing residents cannot easily buy homes in the capital now. There are reports of an annual property tax being implemented throughout the country.Shaun Rein by Fantake via Flickr
Even if prices drop 20 percent (as they might) that won’t cause the panic that hit the US because mortgages won’t be underwater. Loans were not sliced up and packaged to be sold off as CDOs in a massive exercise in leveraging.