Housing Prices Stable, No Crash, No Reflating Bubble

All is well as China's wise leaders engineer another economic transition. At least for October...

The story on October's real estate market: sales up, prices stable. Even Hangzhou has seen such an improvement. Many developers there are looking to reduce inventory and prices cuts are the preferred method. New properties hitting the market are coming in below their forecast prices by as much as ￥1000 to ￥2000 per sqm.

iFeng: 楼市“银十”成交大幅回升 量升价稳已成趋势

Now that the government has eased lending rules, will prices rebound? A large increase only has a small probability says this opinion piece in the People's Daily. The main message: the government wants a stable market, not a reflating bubble; and marketization can't be reversed. The bubble is deflating and local areas will have their issues. An example given is Qingdao, with one-fourth the population of Beijing, but twice the housing inventory.

People's Daily: 房贷新政后，房价会涨吗？

Cheng Siwei says the government will not permit a collapse in the property market, you can be certain of this. “Presently, China's urbanization rate is only 52%. If each year it increases 1%, each year 11 million rural residents will move to cities; each year 7 million college students graduate, they will work, marry; these people need improved housing.

First-tier cities such as Beijing and Shanghai still have great demand for housing and existing home sales are already rebounding in Beijing. Second and third-tier cities with excess supply should encourage rural hukou holders and common people to move into the city, thereby consuming the inventory.

Mortgages are 30% of bank assets and 80% of Chinese assets are in property. If the property market falls, the banking system and average people will suffer great losses. The government hopes to keep prices from rising quickly, but they do not at all hope for a crash.

In addition to mortgages which are about 30% of bank assets (25% is individual mortgages), loans to developers makes up another 20% to 25% of bank assets.

iFeng: 成思危：政府不会允许房产崩盘 房价还得涨