Housing Prices in China - Research Paper Example

 Housing Prices in China Introduction Property market is one of the major markets in China that most investors have invested most of their money. This is because of the booming profits that come along operating in this market. Housing is the major target in this market and thus most investors are investing a lot of money in the real-estate market. The market being at a boom results to the housing prices rising in major cities in China. The boom is alarming thus, the Chinese government is taking major steps to calm the boom to lower the housing prices and make sure that her citizens have better housing at affordable prices and ensure that the economy does not reach the point of property bubble. Executive Summary According to the recent surveys on housing prices in Chinese cities, housing prices rose by 1.24% monthly in the year 2013. In China’s top 10 cities, the rise was even more whereby in Beijing and shanghai, the prices rose by 2% monthly (Huang and William, 8). The housing prices rose by 15.7% during the year 2013 by the month of October. In the same month, the prices of second hand house price index rose by 8.1%.This is based on figures released by China Real Estate Index System (CRESIS). This is very different from the previous year in October 2012 where second-hand price index, according to Ehomeday was declining by 0.2% (Huang and William, 10). The rapid rise of the housing prices in China was rapid between 2000 to 2008, which was mainly fuelled by the low interest rates, and cheap credit. According to data released byEhomeday, the price index for second-hand houses in Shanghai increased by 85% from 2003 to 2008(Huang and William, 10). The increase in housing prices from 2000 to 2008, led to the Chinese government to impose better policies in March 2013 to help curb the inflating prices. The policy indicated that major cities were to publish an annual housing price control target at every first quarter of the year. The People’s Bank of China (PBOC) was authorized to increase the down payments requirement in cities where prices are beyond their price control target (Jim and Wendy, 422). The policy indicated that the banks should tighten mortgages on second-hand houses purchase and foreigners should be restricted to buy only a single property. The government increased the taxes by introducing transaction tax on property to limit selling. The Role of the Government Since the introduction of this policy, there were never many changes in 2013 as the housing prices rose at an increasing rate. The impact of this policy is slowly coming to be. In January 2014 housing prices rose by 9.6%, which is lower than that in, December 2013 which was about 9.9% (Jim and Wendy, 423). The government is doing its best to lower the housing prices and thus more policies to help it achieve its goal are in place. This will help to stabilize the Chinese economy that has been affected by the overpricing of housing. The government’s other goal is to ensure that her citizens have quality housing at affordable prices. Hence, in its projects of urban-rural development, the government has taken the step of building residential homes to reduce the high rate of the Chinese who are homeless (Wang, 2081). Currently the government has built 4 million units of affordable housing, which should be finished by September. By doing so the government will also reduce the demand of housing thus, lower the housing prices,as the reduction of demand will definitely lead to the suppliers of housing to cut their prices. The reduction in housing and property prices will instill faith to the government that most citizens have lost (Wang, 2082). This is due to the high prices that middle-income earners are unable to obtain most properties from major cities. Currently, the housing prices are on the decline.This will lead to loses to investors in the real estate market who bought properties at very high prices in their aim that the prices would increase but are now on the decline (Wang, 2082). The building contractors will be affected negatively if the prices are to fall as projected. They will incur huge loses since they are putting much wealth in new constructions with the hope that the housing price will maintain the skyrocketing price as has been the case since the new millennium. The government’s new project to build affordable housing will stabilize the Chinese economy but it is at a risk of causing more harm than good to the economy. The loses that the investors are likely to count are based on whether the project of building 36 million affordable housing will be a success or will automatically discourage other investors to invest in China thus lowering revenue (Wang, 2084).The projects are also likely to be at a risk of corruption. China’s National Audit Office discovered that about $465 million set for building these housings have been mismanaged by the local government. Zhen Feng, who is a director of the municipal housing bureau, owns 29 properties illegally.Since the beginning of the project last year, corruption has cropped in and this is a warning to the Chinese that it may affect the economy negatively (Yue and Liu, 78). Conclusion The Chinese housing prices are very high and with the policies that the Chinese government has put into place the prices will eventually reduce. The government has to face the many challenges that go hand in hand with its policies and projects. The land prices should be reduced to ensure that the goal of reducing the cost of living in China’s cities is realized. Corruption should be eradicated to ensure that some greedy personnel who manage the projects do not pocket the money the Chinese government is investing. Apart from the government investing only on the affordable housing, it should also introduce services such hospitals and schools in the rural area where these houses are built. By doing so the transportation cost will also reduce since the movement will be minimized in search of these services.In summary if, the government is able to overcome the challenges the housing prices will decrease at an increasing rate and thus stabilize the economy. Works Cited Huang, Youqin, and William AV Clark."Housing tenure choice in transitional urban China: a multilevel analysis."Urban Studies 39.1 (2002): 7-10. Jim, C. Y., and Wendy Y. Chen."Impacts of urban environmental elements on residential housing prices in Guangzhou (China)."Landscape and Urban Planning 78.4 (2006): 422-423. Wang, Shing-Yi. "State misallocation and housing prices: theory and evidence from China." The American Economic Review 101.5 (2011): 2081-2084. Yue, Shen, and Liu Hongyu. "Housing Prices and Economic Fundamentals: A Cross City Analysis of China for 1995—2002 [J]." Economic Research Journal 6 (2004): 78-80. Read More