China Housing Bubble - Dissertation Example

The Chinese government has also secured measures to manage high prices as well as high mortgage rates. The down-payment requisites for second properties were also increased (Dreger, et.al., 2011). For the high housing price areas, the owners were not allowed to more home purchases. The state-controlled mortgage lenders also reduced the mortgage discounts and more measures were installed to be implemented down the road, including increased property taxes. As a result, the housing prices in the cities stopped increasing, but were still very high (Dreger, et.al., 2011).

The housing issue was not only an economic issue, but an issue which also refers to the livelihood of the people, especially one which can impact on stability. Families on average income are likely to be able to afford housing. The ratio of house prices is set at an average income more than 18 in Beijing (Wu, et.al., 2010). The challenge for the government is to eliminate the theoretical in-flows, while still maintaining the strong housing growth. However, although increasing house prices may indicate a bubble, is existence is still debatable.

In fact, the trends of urbanization, as well as elevated incomes and decreased interest rates may have caused changes in the housing phenomenon. The higher prices of houses may still be in line with the basic elements and may still be within the demands under residential housing (World Bank, 2010). A burst in the house price bubble can present major destabilization in the economy.