Beijing Times editorial warns on housing

Yesterday, I discussed the early signs of a reflating bubble and an admonishment from Xinhua. Today, the Beijing Times chimes in with an editorial on the housing market.

The property market is not on a stable growth path (楼市不是稳增长的实现路径)

The editorial asks if the price spike in Guangzhou is a sign that housing policy will be relaxed, that another turning point has been reached? It answers in the negative, the rebound in the market is not a sign of policy easing, but rather could lead to further tightening.

It also asks where the lines are on the government policy: what constitutes skirting the line and what is over the line when it comes to local government housing regulations?

An important line in the editorial referenced losing in the last moment, i.e. the government fails to finish the job and allows the bubble to reflate. This is a major risk, since the government would need draconian measures to pop a housing bubble that reflates over the government's strict regulation and obvious objection.

I still stand by my comments from yesterday: it appears the government may be losing control. Unlike previous editorials that combated rumors of policy easing, these are trying to talk down an actual increase in prices and activity with threats of further tightening—but there's no talk officially yet of tighter housing regulations. In a flip of the script, the editorials are now using rumor to stop a potential market trend.

The housing market is now at the mercy of the economy and the central bank. A repeat of 2008, courtesy of Europe this time, will hammer the housing market even worse than 2008. On the other hand, if the Fed eases and inflation picks up, it appears the real estate market is ready to take off.

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