Chinese picking property bubble to burst
After years of booming prices, the prospect of a bust is looming over China’s vast property sector, with authorities hoping to avoid a meltdown that could send shockwaves through the world’s secondbiggest economy.
Housing was doled out by the state when Communist-style collectivism dominated economic management. But in the past two decades that has given way to market-oriented principles as China’s economy has opened. New home prices have soared, more than quadrupling in Beijing and Shanghai since 2003, and more than doubling in the country as a whole, according to a report by Jeremy Stevens, Beijing-based Asia economist at South Africa’s Standard Bank.
The increases have been a key source of wealth for China’s rising middle classes, and a major driver of the economy.
Now some — including individuals who have made fortunes — foresee imminent disaster.
‘‘I think Chinese property is the Titanic about to crash into the iceberg right in front of it,’’ Pan Shiyi, billionaire chairman of commercial developer SOHO China, said at a forum, reported.
At the same time, surging prices have driven homes beyond the reach of many ordinary Chinese, stoking resentment and inequality.
The People’s Bank of China, the central bank, last month asked domestic lenders to give first-time home buyers priority in mortgage lending, which analysts saw as aimed at boosting home purchases amid oversupply. Observers and analysts concur that problems are rife.
“Real estate is nearly 20 per cent of GDP in China so if that sector has a problem you definitely have a problem,” said Joerg Wuttke, president of the European Union Chamber of Commerce in China.