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China’s 13-year housing rally may soon be coming to an end

China’s property-stock slump points to cracks in its housing market

Beijing and Xi Jinping (Credit: Foreign and Commonwealth Office via Flickr)
Beijing and Xi Jinping (Credit: Foreign and Commonwealth Office via Flickr)

Chinese property stocks took a hit last week, not just because of the global sell-off, but amid concerns that the 13-year-long housing rally may begin to decline this year.

The country’s property stocks have outperformed most of the year, but they took a hard hit during last week’s rout, Bloomberg reported.

Beijing’s crackdown on risk amid skyrocketing household debt hasn’t had much effect on prices yet. Data from December shows that values continue to rise in small cities, while they remained mostly flat in top-tier cities like Guangzhou, Shenzhen and Beijing.

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But there are several reasons to believe the decade-plus of housing price values climbing must end.

For one, banks are raising costs for home loans and restricting supply, especially in the bigger cities. And Finance Minister Xiao Jie indicated that the property tax may be put in place as early as 2020. And third, the government is pushing a policy that will encourage new rental development, which could flood the housing market with new supply.

The Chinese government in 2015 bailed out stock markets, but there’s no such safety net for housing. [Bloomberg] – Rich Bockmann