What Bubble?

[Randy W]

from Forbes

 

What Bubble? How China Stays In Control Of Its Wild Housing Market

 

 

High-end apartment complex in Xiamen, a city which experienced an incredible 43.8% year-on-year rise in housing

 

It is a mistake to view China’s housing market as something left to the whims of a market economy. The system is rigged. Central, provincial, and municipal levels of government have their hands on a powerful deck of levers, which they can move up or down depending on the direction they want their respective housing markets to move in. They control supply and have a very strong influence on demand. When the market gets too hot they cool it off with policies to make home-buying unfavorable or even outright restricted; when the market gets too cool they lessen their restrictions and open up the floodgates of pent-up homebuyers. A graph of the year-on-year price change of China’s housing market since 2011 is a perfect sine wave — obediently rising and falling in direct accordance with government policy.

 

. . .

 

What are HPRs?

Think of Home Purchasing Restrictions (HPRs) as the brakes of a truck rolling downhill. They are a way to halt the runaway momentum of the housing market by manipulating the buyer side via making home purchasing more restrictive and less financially attractive. Then when the housing market equalizes or gets a little cooler than the overall economy wishes to bear, the brakes are let up on, HPRs are eased, and buying new homes become more appealing once again, as the real estate market regains momentum.

How this is done

Restricting how many houses people can buy

. . .

Down payment

. . .

Taxes

As China doesn’t have yearly property taxes, the government takes their cut at the time when homes are sold -- and the amount that they levy can be huge. We’re talking value-added real estate tax, land value-added tax, real estate transaction tax, property tax, property transfer tax, education tax, etc . . .

Price controls

. . .

 

[tsap seui]

Wow!!! By gum, if we here in never Never Land had controls like that in place on our citizens, why....there's never be those pesky situations where the house you bought in some tony city neighborhood would gain $100,000 in value each year until it loses 45% or more of it's value in a 2 month period and many home buyers wind up on the outside peekin' in. Yeah sure, ya betcha