The Real Deal New York

Chinese buyers unfazed by restrictions aimed at taming housing market

Prices rose 9.7% in 70 Chinese cities
July 13, 2017 05:35PM

Beijing (Credit: Nikolaj Potanin via Flickr)

“It’s the crazy thing about people. The more you say no, the more they want in on something.”

When Christian Bale’s character in “American Hustle” said this he wasn’t talking about China’s housing market — but he could’ve been. As the Chinese government tries to tame a frenzy of home purchases — through a series of policies, such as by raising mortgage rates, limiting apartment ownership and upping down payments required on second homes — droves of speculative buyers continue to scoop up apartments.

The result is rapidly climbing prices and extensive borrowing, the Wall Street Journal reported. Prices in 70 Chinese cities rose 9.7 percent in May from the same time last year. Officials are concerned that the property bubble could set off a series of foreclosures once it bursts. At the same time, they don’t want to go too far in slowing investments.

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“Lessons from Japan and the U.S. told us that there is no such thing as an ever-rising market,” Li Xunlei, chief economist at Chinese brokerage Zhongtai Securities, told the Journal.

Still, China isn’t quite in the same place as the U.S. was in the lead up to the financial crisis about a decade ago. Banks in China don’t offer risky mortgages and are limited in their abilities sell off loans as securities. Buyers are also confident that the government won’t allow the market to collapse.

According to Moody’s, real estate accounted for 68.8 percent of China’s household assets at the end of 2016. [WSJ] — Kathryn Brenzel