How do we face today's Chinese house price - Essay Example

Here is a table showing the annual income of some workers in China, as listed by the Forbes Magazine. The interest obtained from the American debts has paved for a considerable rise in the Chinese economy leading to this salary boom states the magazine. (Forbes, 2012) Most of the people who benefited from this price rise were youngsters. They started investing the increased wages directly in the housing sector. Many people started to use the Housing Provident Fund (HPF) scheme extensively. Every employee is required to contribute nearly 5% of his monthly salary towards buying property in this scheme.

Further, the youngsters who inherit properties from their families invest it mostly on buying properties rather than stock market or any other industry. Buying private houses is more profitable than buying apartments for the following reasons. The apartments start to give up by the time the 15 year or 20 year mortgage is finished. There is very little resale value for them as there is no land value. The Ministry of Land and Resources states the Government allocated nearly 20,000 hectares for land for low-income housing development.

Private houses can be built in these areas at the cost of purchasing an apartment in the heart of the city. Hence, many youngsters prefer building a private house here, rather than an apartment. Unlike the American cultures, the Chinese families are still very tightly lit. Each house has more than one breadwinner. They simply invest money from various relatives and buy a huge house where they can stay with their full family instead of staying alone in a tiny apartment. Buying a private house immediately after landing a good job, helps them save on their taxes.

Several households have one or other member working offshore in the US soil or in the Middle East . The money earned by them is usually transferred into private houses by their kith and kin in their home town. Reflection of Government Policies on the Chinese Housing Sector Chinese economic growth and political stability resulted in massive house price rises by the beginning of 2010. The government was wise enough to introduce various measures to keep it in check. They introduced various measures by April 2010 like raising the property taxes for luxury houses in main cities like Shangai and Chongquing, increasing the mortgage rate for second houses, prohibiting mortgages for third houses, and controlling NRI investment.

As these measures started to give fruits, the price rise of the real estate market was kept in strict check for the past two years. The situation started changing in July 2012. The government started easing certain tight measures in order to encourage the real estate market. They speeded up the major construction projects kept on hold and announced interest cuts and subsidies for eco-friendly electronic houses. China's economy looks very promising when compared to many European nations debt surge.

Hence, foreign investments keep pouring in. The Chinese governments wise measures like encouraging cheap social housing and strict home-purchase restrictions for high quality luxury homes, paved for the really poor to buy property. Since, they do not invest in any major projects and most of the mortgage is collected through HPF, there is no stagnancy in the market and long term planning is