Text Version
RSS Feeds
Newsletter
Home Forum Photos Features Newsletter Archive Employment
About US Help Site Map
SEARCH   About US FAQ Site Map Site News
  SERVICES
  -Text Version
  -RSS Feeds
  -Newsletter
  -News Archive
  -Give us feedback
  -Voices of Readers
  -Online community
  -China Biz info
  What's new
 -
 -
China's housing market should be alert to American-style risks
+ -
15:54, July 06, 2009

 Related News
 Real estate sales up, prices soar
 Future direction of China's real estate market remains unclear
 Prime land in Beijing's CBD area auctioned for record 4.06 bln yuan
 China denies reports on easier rules for foreign investment in real estate
 China's proportion of land value in housing price is far below UK and US
 Comment  Tell A Friend
 Print Format  Save Article
It was recently reported that commercial banks in some cities have lowered their lending thresholds and require a down payment of just 10 percent to compete for more consumers. Not only does this practice violate regulatory requirements, but it also increases potential risks to the banks.

The strong flow of credit has eased the financial strain faced by real estate developers and expanded demand for housing purchases, particularly as a form of investment. This increased the general public's inflation expectation, and pushed up housing prices.

However, uncertainties still exist as China's real economy has not fully recovered and the basis of housing prices remains unstable. If house prices fall by over 10 percent, the risk of mortgage defaults will substantially increase.

In addition, the practice of lowering mortgage down payments will amplify speculation in the market, boost the formation of asset bubbles and intensify market fluctuations.

The index of residents' confidence in future income stands at just 3.4 percent, a drop of 14.3 percentage points quarter-on-quarter and 16.9 percentage points year-on-year, according to a recent survey by the central bank. If the income of house buyers falls, mortgage default rates will increase.

In the past, in order to stimulate its economy and accelerate the recovery of its real estate market, the US government relaxed mortgage regulations and lowered lending thresholds for mortgages by requiring zero down payments and offering loans to families originally deemed incapable of repaying the loan.

However, as house prices continued to fall and interest rates rose, mortgage default rates significantly increased, triggering a chain of market crises. This is a lesson we cannot afford to forget.

By People's Daily Online

http://paper.people.com.cn/rmrb/html/2009-07/06/content_289505.htm



  Your Message:   Most Commented:
India's unwise military moves
Veiled threat or good neighbor?
13 more bodies from Air France flight 447 recovered
To Be or Not To Be-- reflourishing bicycle in China
Cambodia FM: Thailand threatens Cambodia and UNESCO over Preah Vihear temple

|About Peopledaily.com.cn | Advertise on site | Contact us | Site map | Job offer|
Copyright by People's Daily Online, All Rights Reserved

http://english.people.com.cn/90001/90778/90857/90862/6694229.pdf