Xinhua Editorail: China Housing Market Unlike U.S., Japan and Hong Kong; First-Tier Prices Could Soar

Xinhua Insight: China's housing market not to crash: history revisited

There is no shortage of prophets predicting doom for China's housing market, but the history of recent property bubbles gives precious little to support their creed.

There is no doubt that China's home market is losing steam. Growth in home prices slowed to a near one-year low. Investment, construction and sales have all slowed.

All this might be seen as adding weight to predictions that China will fall into the same old trap that caught the United States, Japan and Hong Kong. All three have seen property bubbles burst in the past couple of decades.

A closer look at the three cases might make cause those doom mongers to think again.

Home price declines won't become trend: researcher

Song Li, a senior researcher with the Academy of Macroeconomic Research of the National Development and Reform Commission, said at a news briefing that the current home price at the national level is almost at equilibrium.

"There may be minor fluctuations, but I don't see a trend of declines in the near future," said Song, referring to moderated home price increases or even declines recorded in major cities in recent months.

"China's urbanization rate is still relatively low and there is much room for the property market to develop," he said.

Dismissing worries that falling home prices may result in mounting non-performing bank loans or even create systemic financial risks, Song said banks are resilient to price cuts.

"Some analyses have showed that Chinese banks can withstand price falls by up to 30 percent. I agree with that," he added.

This article considers the economic factors, such as rising wages, and says real estate in the first-tier cities may soar yet again.

社科院:中国楼市泡沫与日本当年相似 北上广或再疯长

Chinese Academy of Social Sciences pointed out that the reference to a study of real estate development experience in Japan, North Canton house prices are still much higher than people's psychological or anticipated skyrocketing, China's real estate bubble and the current rapid development of the property market in Japan has surprisingly similar.

May 20, Institute of Japanese Studies, the Japanese Economic Association and the National Social Science Documentation Publishing House jointly issued in Beijing, "Japanese Economic Blue Book: Japanese Economy and Sino-Japanese economic and trade relations research report (2014)."

Blue Book, said high prices, high land prices and even the real estate bubble, if you leave the underlying support rapid economic growth, it will definitely become a forest without trees, without water, and eventually the bubble burst.

Blue Book that Japan's postwar development of the real estate market and the evolution path of logic, for thinking about the real estate bubble in China today provided an important reference materials and research perspective.

Japan Institute of Nankai University associate professor, director of the National Institute of the Japanese economy, said Liu Xuan, Japan third reason why the real estate bubble burst, the real estate market is due to the lack of strong economic growth, income growth and demand for housing and other elements of the rigid support, finally leading to real estate crash, and interpretation of up to 20 years of "stumble endlessly."

Liu Xuan said that today China's real estate bubble, rising prices and other phenomena with high growth period of the Japanese real estate market has a striking similarity. However, taking into account the impact of the Chinese population, regional differences, coupled with institutional transition occurred during the corruption, inequality, income disparities and other factors, China's real estate market is facing the problem is more complex and profound than in Japan.

Blue Book says, learn from the development experience of the Japanese real estate market can be judged: In China's current stage of rapid economic growth, accompanied by urbanization, industrial upgrading, together stimulate population growth and population movements and other factors, China's urban real estate market will face a prolonged process of price increases, especially in Beijing, Shanghai, Guangzhou and other big cities, but also can occur much more than people's psychological expectations skyrocketing housing prices.

On the contrary, only with the decline in future economic growth, urbanization process ends and income rise, narrowing the income gap between the country, coupled with increasing housing supply, housing is difficult, expensive housing and other issues have been resolved after a certain extent, China's real estate prices before There may be truly rational regression.

Blue Book analysis of the evolution of the real estate market in Japan after the war path and three different outcomes illustrate the real estate bubble, often accompanied by rapid economic growth to generate high prices, high land prices and even the real estate bubble. The so-called high prices, high land prices and even the real estate bubble is on people's income levels and purchasing power in terms of the reality that real estate prices over the relative purchasing power of people's reality. General sense, implies the existence of high prices on the real estate bubble.

Liu Xuan said:. "Housing bubble will burst and does not necessarily mean the collapse, but that does not mean necessarily derivative of the bubble economy and the real estate bubble may eventually be reasonable to release or ablation through continuous adjustment between the various economic elements" from Long-term trends in the overall point of view, China's urban real estate market is still room for growth, but this does not exclude some areas the real estate bubble burst and collapse of individual real estate projects.

On Sino-Japanese economic and trade relations, the Blue Book analysis: a serious impact on Sino-Japanese dispute over the Diaoyu Islands and trade relations caused by the continued, sustained negative growth in 2013, bilateral trade and mutual investment is also negative growth, the share of Japanese government bonds and mutual frustration yuan direct trading, the Korea FTA negotiations no substantial progress, "cold politics and cold" posture more and more obvious, the Sino-Japanese economic and trade relations into the lowest point since the normalization of diplomatic relations.