Categorized | International

China’s Housing Bubble

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During the past year, the Chinese government has proactively taken measures to prevent the uncontrollable growth of a potential housing bubble. The nation has looked to avoid any kind of crash that could devastate the economy similar to what has happened in the United States.

With that being said, experts have been keeping a close eye on the Chinese real estate market, putting it side by side with that of the United States for a comparative analysis. According to the data, China’s housing situation looks to be far better than that of the United States.

While government measures have caused new home sales in some areas to decline dramatically, their actions are working to benefit the bigger cities. These measures are working to deflate the housing bubble so as to prevent it from bursting and causing great economic turmoil.

When comparing the United States housing market with that of China, there are some glaring differences that may help China successfully avoid the bursting of any kind of housing bubble. One such difference can be seen in the size of the average down payment for a new home.

In the United States, a down payment on a property can be as low as five percent. With such a low down payment, homeowners are put at risk of underwater mortgages, as decreasing values in the housing market are much more likely to drop below the total amount of mortgage loan.

In China, the situation is vastly different. Most down payments are for forty percent of the home being purchased. As such, homeowners are far less likely to find themselves in a situation where they are underwater and unable to afford their monthly payments.

The overall outlook in China with respect to housing is that real estate ownership serves as a means of saving money. It is that outlook that helps keep any kind of real estate bubble within safe limits.

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About Nancy Raven

Nancy is the main writer for the International section of the website. Sometimes she also helps Drew out on the Finance/Mortgage section as well.

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