Is China's Housing Market Is China's Housing Market Caught in a Speculative Caught in a Speculative

Bubble?Bubble?

Group 4Group 4

MinhPhuong, Powen, MinhPhuong, Powen, Yu-Hsin, Ching-HungYu-Hsin, Ching-Hung

ContentContent

The situation of China’s housing The situation of China’s housing marketmarket

How does it happenHow does it happen What are China’s policiesWhat are China’s policies ConclusionConclusion

What Is a “Bubble”What Is a “Bubble” Factors giving rise to a bubbleFactors giving rise to a bubble

Sharp increases in the price of an asset like real estate or dot-com shares

Great public excitement about said increases An accompanying media frenzy Stories of people earning a lot of money,

causing envy among people who aren’t Growing interest in the asset class among the

general public “New era” theories to justify unprecedented

price increases A decline in lending standards

The situation of China’s The situation of China’s housing markethousing market

China's housing market China's housing market continues to soarcontinues to soar Property prices rose again in August Property prices rose again in August

2013 by an average of 7.5%. In their 2013 by an average of 7.5%. In their 70-city survey, a total of 66 cities 70-city survey, a total of 66 cities recorded price increases last month recorded price increases last month compared with 62 in July when average compared with 62 in July when average prices rose by 6.7%. August’s price prices rose by 6.7%. August’s price increase is the highest spike since increase is the highest spike since December 2010.December 2010.

House price change (Shanghai)% change over a year earlier

Second-hand House Price Index, Shanghai (2003=1000)

                                     

http://www.zerohedge.com/news/2014-05-02/leaked-http://www.zerohedge.com/news/2014-05-02/leaked-recording-reveals-true-state-chinese-housing-marketrecording-reveals-true-state-chinese-housing-market

How it occurredHow it occurred Inflow of global hot money Devaluation of RMB The supply exceeds the demand Gap between the wealthy and poor Local government policies

Increase income Increase GDP Ghost cities

China’s policiesChina’s policies

Implemented the policies in 2013Implemented the policies in 2013

Major cities should publish an annual housing price Major cities should publish an annual housing price control target.control target.

Cities with overheating housing markets are to Cities with overheating housing markets are to raise their commodity housing and land supply, raise their commodity housing and land supply, while cities with declining prices should keep prices while cities with declining prices should keep prices stable by stimulating housing demand.stable by stimulating housing demand.

In cities where price hikes exceed their price In cities where price hikes exceed their price control targets, local People’s Bank of China (PBOC) control targets, local People’s Bank of China (PBOC) branches will increase down payment branches will increase down payment requirements.requirements.

Tighter mortgage restrictions on second home Tighter mortgage restrictions on second home purchases will be implemented in banks. Buyers purchases will be implemented in banks. Buyers without a local registration are barred from buying without a local registration are barred from buying more than one property. more than one property.

Implemented the policies in 2013 Implemented the policies in 2013 (cont.)(cont.)

Banks should not give loans to developers that Banks should not give loans to developers that hoard land and participate in price-inflating hoard land and participate in price-inflating activities.activities.

Local governments must boost low-income Local governments must boost low-income housing production.housing production.

The government will continue to reform property The government will continue to reform property taxes, to include an extension of the trial holding taxes, to include an extension of the trial holding tax from Shanghai and Chongqing to other cities, tax from Shanghai and Chongqing to other cities, and a transaction taxand a transaction tax

Recent changesRecent changes The average housing price increase The average housing price increase

is going down.is going down.

Housing Construction Housing Construction Falls Falls

Tight credit, restrictions Tight credit, restrictions on the ownership of on the ownership of multiple homes and an multiple homes and an easing of prohibitions on easing of prohibitions on alternative investments alternative investments overseas have triggered overseas have triggered a long-expected a long-expected downturn in the Chinese downturn in the Chinese residential housing residential housing market. market.

http://www.ebctv.net/industries/chinese-real-estate-real-trouble/http://www.ebctv.net/industries/chinese-real-estate-real-trouble/

ConclusionConclusion

Exploding demand-urbanizationExploding demand-urbanization Micro-stimuli policiesMicro-stimuli policies The China’s housing market is The China’s housing market is

cooling down, but not collapsingcooling down, but not collapsing

Thank you Thank you for for

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