Chinese Property Market Outlook

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Chinese Property Market Outlook

August 23, 2016

There have been murmurs of there being a housing bubble in China for many years now. The New York Times actually spoke of a housing bubble in that country back in 2005! The Economist warned of a Chinese real estate crash in 2008. 

But before you rush off to sell your apartment in China fast, here’s what you should know – China is different from other countries. China does not really have a history of housing bubbles, because its property market is a relatively new one.

Historically, the State has always owned property in India. Private individuals were not allowed to own their own houses or apartments. It was only in the early 1990s, when the Chinese government decided to loosen the strings of Communism that people were allowed to own properties.

Back then, the Chinese government sold properties to its citizens at ridiculously low prices. So it was only in the early 2000s when the Chinese were confident enough to buy and sell properties. The real property market in China is actually not more than 10 to 15 years old.

Since then, property prices have risen every year in China, often by double digits. It is only recently that there has been a relative softening of the real estate market in the country. Not in the cities of Shanghai and Guangzhou though, here the property market shows no sign of calming down.

In the second tier cities in China, there’s no question that there’s an oversupply of apartments, because of the extraordinary construction activity in the country over the last 20 years. But this should not to be taken to indicate that there’s a housing bubble in China.

Now, there might yet be a housing bubble, we do not know. After all, if everyone was able to identify a housing bubble in advance, there wouldn’t be one. Most people are overly optimistic when things look good and too pessimistic when things are not so good. 

 The point is there is no historic data that we can work with, to predict the future of the property market in China with any degree of confidence. All we can say is that there will always be a demand for properties for sale in China as it is a fast growing economy with a rapidly expanding population. The people of China will need places to stay, and it doesn’t matter what the property prices are.

 Indeed, if the property prices in China appear to be high right now, it’s because they were kept artificially low for decades. So they are just breaking out.  The price appreciation in the housing marketing is only natural, given the pace at which China is growing.

For sure, there might yet be a housing crash in China in the near future – after all, nobody predicted the Chinese stock market crash of 2015, but it happened.

But it does seem unlikely that the housing bubble will burst anytime soon. Even if it does, we expect the Chinese government to step in and take effective action. So if you’re looking to buy an apartment in China online, there’s no reason to put off the purchase as yet.