China’s economy has slowed down over the past few years. The Chinese government is doing everything it can to try and sustain the high levels of growth it enjoyed through the first decade of the 2000’s. China’s housing market has until recently remained relatively strong, but signs are beginning to show that the bubble may be in danger of popping.
China’s central bank has recently lowered the minimum downpayment buyers must have to purchase housing to 40% from 60%. This represents a shift to try and expand the purchasing demographic to a group that may be less financially well off than before. This change is not necessarily a bad thing, however, as in recent years housing has become prohibitively expensive for most normal Chinese consumers. Unfortunately, even if the housing market is opened to more people, a struggling economy may bode poorly for the future.
The fact that this move to increase coincides with other measures made by the government does not bode as well, especially when looking at the big picture. Many of the financial decisions made by the Chinese government recently point to a lack of confidence in the economy, and a struggle to try and maintain as much growth as possible. Reserve rates have been lowered as well as interest rates. If the housing market begins to struggle more, or if the housing bubble pops – China’s GDP would be badly hurt.
Source: http://www.arabnews.com/economy/news/725611
I’m no expert, but this seems to be headed to where the U.S. was before 2008. It seems developers have outpaced consumers in China. In an effort to stimulate consumption, they have lowered the standards to get a place of your own. This lowering of the standards, hover, is seemingly dangerous to me. I’m sure these less qualified, under-funded buyers coming into the real estate game (because of the lower standards) are more likely to default on loans and not make their payments.