Thursday, June 26, 2014

China tries to prop up a falling property market

In order to combat the growing lack of confidence in the real estate market of China, local governments are releasing restrictions on who can buy houses, offering incentives for those who can, and returning to the previous price control.

The means of the Communist Party also began to talk about the latent potential of the market, in what appears to be an attempt to bolster confidence in housing prices.

However, through China, real estate developers are struggling to get rid of inventory, using unorthodox techniques sales suggest a deep concern for the future.

A collapse of real estate prices would be catastrophic for the Chinese economy: the vast majority of Chinese wealth are invested in housing and real estate industry has been the engine of growth during the last decade.

'Saving the market'

In the intermediate cities throughout China, which are still huge compared to global standards, officials relocated restrictions that existed a few years ago in order to get people to buy more houses. Such measures are known in Chinese as "Jiushi" or "saving the market,"

Wuhan, a center of transportation in central China on the banks of the Yangtze River, encourages college students to travel there to study. They can get a local residence permit upon graduation, winning local employment, and most importantly, buy a house, as dictated by the new policy.

The official residence status in Chinese cities is controlled by the regime through what he calls the "hukou" or household registration system, which acts as an internal mechanism visa or passport within China.

People born in the country are relegated to rural hukous. Without a city hukou, they second class citizens to move to become a city, unable to send their children to school, or buy apartments or cars.

Other cities promote local hukous promise in exchange for the purchase of homes, according to Xinhua, the official Chinese news agency.

The city of Wuhu in Anhui Province in Central China canceled the restriction college graduates need to complete three years of full-time work before receiving grants for a first home purchase.

Zengchen and Conghua two second-tier cities in the province of Guangzhou also began to put restrictions on home prices, credit, inventory, and identity of the buyer, which was added in past years in an attempt to make the market does not unstable.

Because the restrictive economic policies, which are an essential part of the model of the Chinese regime for economic growth, have channeled a large portion of household income on housing, even minor changes in policies, amplified by the vast population of China, may have an effect immediate and significant.

But such measures can be at best a temporary cure. Signs of a slowdown are inexorable everywhere.


Deutsche Bank AG said in a report on June 13, according to Bloomberg, which cut prices only after 10 or 15 percent, developers were able to get an acceptable sales volume.

Official data show that from April to May, household prices declined in 35 of 70 cities, something unseen since May 2012.

Prices of capital goods in large companies listed Chinese roots in the U.S. also stumbled this year, SouFun a real estate website, losing 25 percent of its value in June, and E-house China Holdings Ltd., Chinese property agent, down 13 percent.

Property Market Index Shanghai fell 6 percent this year, reflecting the fortunes of two dozen real estate companies that monitor the.

Li Junheng an analyst at the Chinese economy of Warren Capital based in New York, recently told a newspaper that "larger cities including Shanghai are seeing price reductions both within and outside the inner ring road, 2 - 3 percent and 8-10 percent, respectively. "

The newspaper also said the slow economy led to high-end retailers to open new stores in shopping malls and large real estate projects make discounts of up to 50 percent. Even the always confident VIPs traveling to Macau's casinos were minimized.

"We think the market dynamics are significantly different from those of 2008-09 ... and 2012 ... when the market is seeing a fundamental and structural surplus, and a feeling of low energy," wrote Li Junheng.

taking Internet

The People's Daily, mouthpiece of the Communist Party, is on the defensive about the settings of real estate policies.

"Real Bears have ulterior motives, ajustamientos prices are normal," said the headline of a recent story.

"The real estate agreements have tended to decline this year, bringing suddenly shouting 'collapse', 'tipping point', 'bank runs' and other pessimistic theories," the newspaper said.

Actually, this is all part of a "normal adjustment", the newspaper said, setting the Party line in the politically correct way to see the real estate market.

Other officials were more sober. Pan Gongsheng, the vice president of People's Bank of China, said at a recent forum, as paraphrased quote, if the people of a country keeps its wealth in real estate, can bring many problems to economic development, leading to a real estate bubble it explodes and brings an economic crisis.

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