China’s Real Estate Worries Continue

Published on Author greenwoodp14

China’s housing prices fell again in November, marking the seventh consecutive month of decreasing home values. Real Estate data provider China Real Estate Index System surveyed 100 cities and found average new-home prices fell 0.38% in November (Wall Street Journal). 76 of the cities analyzed showed a decline in housing prices, marking 3 more markets now reporting falling house prices than in October. Chinese housing prices began falling in May and have continued their descent despite Government action.

thCAMTM359In September, China cut mortgage rates and down-payments for many home-buyers (Yahoo Finance). However, these efforts have been largely unsuccesful as exemplified by continued falling prices the past 2 months (October and November). On November, 21 China decided to cut interest rates. This was the first interest rate cut in more than 2 years, as China’s Central Bank cut the benchmark one-year lending rate by .4 percentage points (AFP).

Analysts wonder if these interest rate cuts will give the housing industry a much-needed spark. Some insiders have stated more must be done to ensure the housing industry rebounds, while others have stated lower interest rates will energize the real-estate market by early 2015.

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2 Responses to China’s Real Estate Worries Continue

  1. First, the decline is modest but may hide large drops in certain cities. Measuring real estate prices is also an empirical challenge, so two significant digits is BS [true of most economic data]!

    Second, can real estate be sold? A key element of our own crisis is that sales dried up. Even if you were willing to “match market” there were few buyers. So knowing whether the mortgage rate cuts affected that component of the market is really important.

  2. China’s real estate industry is still relatively young compared to the rest of the world. I wonder if many of these slowdowns/booms of the past 20 years are part of the growing pains associated with rapid economic expansion. It would be interesting to see how the commercial real estate market has been performing as well, many pieces on Chinese real estate are only focused on the residential market. I imagine the trends are generally the same, but there may be some changes in the magnitudes between the residential and commercial markets.