Current China Housing Market Term Paper

Download this Term Paper in word format (.doc)

Note: Sample below may appear distorted but all corresponding word document files contain proper formatting

Excerpt from Term Paper:

China Housing Market

Starting with 2008, and deepening in 2009, the world has been facing an economic crisis, the severity of which has often assimilated with that of the depression between 1929 and 1933. At the beginning of the twentieth century, the major problems laid in overproduction, whereas the crisis of the twenty first century was constructed on the credit crunch, brought out by the subprime mortgages offered by the American banks. What is however common to both crises is the fact, that while emerged within the United States, they soon expanded to impact numerous other regions. The main element which allowed the Great Depression to expand to other regions was that, after the First World War, the United States became the creditor of the European regions suffering war losses. As the U.S. however faced financial challenges, they proved unable to any longer support the economic revival of the other nations. In more modern times, the economic crisis expanded as a result of the growing forces of globalization, a phenomenon which allows and encourages the economic, political, technological and socio-cultural values to transcend boundaries from one location to the other. There are some voices which argue that globalization has been created as the attempt to the North American country to impose its ways upon the entire world; this belief gave birth to the concept of Americanization.

All this information is crucial to set the context for the current research: the housing market in today's China. As mentioned throughout the previous lines, the financial crisis was brought on by the American real estate industry. Soon, the real estate sectors in other global regions registered demises. The question being posed in this context is whether, and how, the real estate sector in China, a strong economically emergent nation, has been impacted by the crisis.

2. The International Housing Market

The mechanism behind the problems emerged within the global real estate sector was that of banks and other financial institutions granting credits to people who revealed reduced abilities to reimburse their debts. As the populations became unable to pay, the banks tried to sell the properties and recuperate their money. The value of the houses had however declined. Entering a vicious circle, the construction industry took a severe plunge, followed closely by the furniture industry, the electronics sector, automobiles and virtually all economic sectors.

Overnight, the prices in real estate plunged and the offer increased. Nevertheless, the populations were now unable to purchase homes as their access to finances was drastically reduced by the more prudential financial institutions. While it may seem that this situation depicts the American real estate market, it can safely be argued that it is also applicable to Spain, Italy, or other countries.

In Spain for instance, the inventory of homes increased by 24%; the number of new houses being built decreased by 50% in 2007 alone; the estimations for 2008 pointed out to a 70% decrease in the construction of new houses. The prices of the houses in Great Britain decreased by approximately 20% in less than four months. Prices and demand for real estate properties in Easter Europe also decreased, but the situation here is somewhat different in the meaning that these countries (Hungary, Bulgaria, Romania and Poland) are new members of the European Union and find themselves in a slow process of transition to the euro. Loans in euros are as such extremely popular in this region, but the fluctuating exchange rates took their toll on the state's real estate sectors, as the loans became more expensive and numerous owners found themselves in an impossibility of payment (Leap 2020, 2007). In Japan, the prices of both land as well as houses decreased; in the first quarter of 2009 for instance, prices decreased by 9.2% comparative to the same period of 2008. Also here, prospective customers or constructors found it challenging to acquire loans from the over protected banks (Global Property Guide, 2009).

3. The Chinese Housing Market

Before presenting any factual data, it has to be stated that the Chinese real estate sector was impacted by the internationalized economic crisis, but to a less intense degree. This is mainly due to the fact that the banks and other financial institutions in China did not become engaged in subprime mortgage operations, or at least not as much as the United States. While the American banks requested a 2% down payment on real estate acquisitions, the Chinese banks requested that customers paid at least 40% from the price of the house in advance. Companies looking to buy commercial spaces had to make a 50% down payment. The action was implemented as part of a larger strategy to cool down the housing market, in which retail prices were continually on the rise. In supporting the efforts, as well as reducing the demand for houses, the Chinese government offered an increased access to low rent houses (Latest News and the Property Market in Singapore, 2007). All this was happening in a context in which the United States and Europe were reducing down payment necessities in an attempt to increase the population's access to mortgages. Given this approach of the market, it is only natural for China's real estate sector to have been less impacted by the internationalized economic crisis.

At the beginning of 2007, the Chinese real estate sector was prudential, but manifesting sustained growth. Foreign direct investments in Chinese housing construction were continually increasing, and the retail price of real estate properties had increased by an estimated 40%. At the beginning of 2008 however, the increase in retail prices was of a mere 0.7%; in most cases however, vendors were willing to offer up to 10% discounts to attract more customers. By June, the prices of houses had decreased by approximately 20% (an exact figure cannot be offered due to the lack of a nationwide price index on housing). Measurements of the real estate industries foresaw future decreases of 30% in the retail prices of the houses and apartments in the largest Chinese cities; the volume of traded houses also decreased by an estimated 20%. The evolution of the retail prices on houses is best depicted by the chart below:

Source: NuWire Investor, 2008

Despite the severity of the decline, fact remains that the figure point out to a less dramatic situation than that in the United States or in Europe. This was generally due to the previous anti-speculative measures implemented by the Chinese government, including the following:

property restrictions imposed on foreigners; ownership for investments was eventually prohibited for both individuals as well as economic agents the introduction of a property business tax, combined with stricter controls over lands the increase in the required down payments (NuWire Investor)

Sales began to pick up starting with November 2008 however. In 2009, the housing market in China is showing signs of revival, unlike other global regions, which seem to find no way out of their problems. As the year commenced, sales began to increase. In January for instance, 600 apartments were sold in Beijing in less than 24 hours. The real estate projects presented customers with reduced prices, making the houses more accessible to the prospective buyers. The government once more intervened with the attempt this time to drive house trade up. With this objective in mind, they reduced the property taxes, as well as the interest rates on mortgages.

As it can be observed in the following charts, both the volume of traded houses increased in 2009, as well as the construction endeavors. Despite the reduced growth in constructions, fact remains that the Chinese housing sector shows signs of improvement uncommon to other global regions.

Source: Batson, 2009

The main reasons as to the different outcome of the housing markets in China and those in Europe and…[continue]

Cite This Term Paper:

"Current China Housing Market" (2009, November 27) Retrieved December 8, 2016, from

"Current China Housing Market" 27 November 2009. Web.8 December. 2016. <>

"Current China Housing Market", 27 November 2009, Accessed.8 December. 2016,

Other Documents Pertaining To This Topic

  • Japanese Housing Market Your Purchase Japanese

    This draws a pattern of the land price model, concentric as one moves away from CBD. An interesting element of the Japanese housing market system that is worth considering in terms of its impact on the housing market is the savings rate and savings behavior in Japan. Traditionally, the savings rate in Japan is high, with a population that is risk averse and tends to invest in instruments that have

  • Real Estate Bubble in China

    S. prior to the collapse of prices. As real estate accounted for 6.1% of all of China's GDP growth last year. This is the same level as the U.S. during 2005 and Japan during the 1980's. Commenting about what was taking place Citigroup analysts observed, "It's evident that property prices are no longer sustainable once the residential investments achieve above 8% of nominal GDP, and China may not be an

  • U S Financial Market Lessons

    China for instance, which was more protective and where the government was more involved in the regulation of the financial sector, feels the economic repercussions to a lesser degree (Batson, 2009). 3. Avoid over-inflation of prices The root cause of the sub-prime mortgages was the necessity for people to buy houses at unrealistically high prices. As a future recommendation then, better controls should be instated not only within financial markets, but

  • China the Political System of

    The new reform policies set up industries producing appliances, textiles, garments, computers, mobile phones and other inexpensive manufactured goods (Shekarabi & Rabii 2007). While China opened up to foreign investments and the outside world, its leaders assured that the transition to a market-oriented economy would be complemented with policies to promote social stability. As foreign money pours into the Chinese markets, research and development in various fields advance the status

  • Real Estate Markets on Shenzhen

    1998). In 1999, Shenzhen was only one of six cities in the whole of China that saw a profit within the real estate sector (Zhang 2001). 2.2 Knowledge Gap Yet, even with so much information, there are gaps within the research. There a very few studies conducted within the past few years. Most around the beginning of the new millennium; "However, the literature on contemporary Chinese housing focuses on the process

  • Low Income Housing Initiatives in

    In this regard Pindell advises, "The city is a place in which diverse groups, distinguished by income, race, or other characteristics, engage in a competition for space. For some, efforts within the competition are focused on excluding certain populations. Suburban communities incorporate to separate themselves from cities; some individuals live within the protections of gated communities, and some localities engage in zoning practices designed to limit housing opportunities for

  • Nordstrom Market Structure the Market Structure of

    Nordstrom Market Structure The market structure of the retail industry is that of monopolistic competition. As its name suggests, monopolistic competition is an environment composed of a large number of firms each with a portion of the market. The firms in this type of market structure have similar products but they are differentiated in some way. Nordstrom's for example has private brands that only Nordstrom's can carry. These brands include Hotel Collection

Read Full Term Paper
Copyright 2016 . All Rights Reserved