Beijing may have slowed housing bubble — for now

Chinese government adopted policies last year to slow unsustainable growth

National Weekend Edition /
Jan.January 30, 2021 12:00 PM
China’s domestic housing sector was entering bubble territory last summer. (Getty)

China’s domestic housing sector was entering bubble territory last summer. (Getty)

 

The Chinese government’s recent efforts to temper unsustainable growth in the country’s housing market seem to be working, at least for now.

The price of new homes in the country’s largest cities was up 3.7 percent year-over-year in December, the slowest rate of growth since 2016, according to the Financial Times.

China’s domestic housing sector was entering bubble territory as of last summer. Buyers were more heavily leveraged than ever, homes were flying off the shelves, and investors had put $1.5 trillion into the market between June 2019 and 2020.

That growth was slowed only temporarily by the coronavirus pandemic, and by the end of the year, the government stepped in.

“The government doesn’t want property prices to keep rising and rising,” said a researcher at a government-run think tank, who called that “politically not acceptable.”

In August, the government adopted tighter lending requirements for developers, including a 70 percent ceiling on liabilities to assets and a 100 percent cap of debt to equity. Developers also had to have enough cash on hand to meet their short-term obligations in full.

Still, it’s unclear how effectively the market can be kept under control.

Orient Capital Research’s Andrew Collier said the government is better at controlling credit today than 5 or 10 years ago, but that banks and non-traditional lenders had ways to “game the system.”

The government has since targeted lenders, limiting loans to developers and allowing mortgages to make up only 32.5 percent of a bank’s outstanding credit.

[Financial Times] — Dennis Lynch


Related Articles

arrow_forward_ios
Chinatown housing project scrapped after non-profit head went rogue: lawsuit
Chinatown housing project scrapped after non-profit head went rogue: lawsuit
Chinatown housing project scrapped after non-profit head went rogue: lawsuit
Downtown buyers also enter a revitalizing urban core, as Chicago has entered the final phase of the state’s reopening plan. (iStock)
Downtown condo market heats up as city reopens
Downtown condo market heats up as city reopens
1917 North Howe Street (Google Maps)
Lincoln Park mansion sells for record-breaking $11.9M
Lincoln Park mansion sells for record-breaking $11.9M
Home sales and prices soared in the Chicago area last month
Chicago area home sales, prices soar for first time in years
Chicago area home sales, prices soar for first time in years
This home in Winfield, Illinois sold for $320,000 in March (Credit: Google Maps)
These suburban markets were on fire in Q1
These suburban markets were on fire in Q1
DeNiro-backed Nobu Hotel developer sues contractor, WeWork selling Gulfstream jet Neumann made his own: Daily dirt
DeNiro-backed Nobu Hotel developer sues contractor, WeWork selling Gulfstream jet Neumann made his own: Daily dirt
DeNiro-backed Nobu Hotel developer sues contractor, WeWork selling Gulfstream jet Neumann made his own: Daily dirt
City Park District too broke to afford Sterling Bay’s gift, Chicago complex trades for $16M despite seller’s federal indictment: Daily digest
City Park District too broke to afford Sterling Bay’s gift, Chicago complex trades for $16M despite seller’s federal indictment: Daily digest
City Park District too broke to afford Sterling Bay’s gift, Chicago complex trades for $16M despite seller’s federal indictment: Daily digest
Chicago housing market steady, if not stellar, Chase chief economist says
Chicago housing market steady, if not stellar, Chase chief economist says
Chicago housing market steady, if not stellar, Chase chief economist says
arrow_forward_ios

The Deal's newsletters give you the latest scoops, fresh headlines, marketing data, and things to know within the industry.

Loading...