Categorized | International, Investing

China’s Real Estate Market Faces Tipping Point

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The restrictions that had been put in place by the Chinese government to prevent a housing bubble may be driving the nation’s real estate market to its tipping point. In the past month, housing prices and sales have both dropped by more than ten percent. Sixteen cities reported significant price drops in their residential real estate markets.

With land sales also dropping, developers in the country are struggling immensely. The decline in sales has caused many developers to have great difficulty in securing financing. The very fact that housing prices are falling too makes accessing bank financing even more tough than in recent years.

There is little indication that the Chinese government will ease on the restrictions to reverse the current trend. In order to eliminate any possibility of a housing bubble, the Chinese government has taken such measures as increasing interest rates, raising the amount required for down payments, and put a halt to the practice of lending to property developers.

While the immediate impact following the implementation of these restrictions was fairly minimal, the overall impact on the grand stage is starting to become very apparent. In Beijing, the price of land has dropped over seventy-five percent in the last month. In other cities, it has dropped as much as fifty percent.

Developers are not the only group struggling due to the restrictions. Lenders and financers are struggling to produce enough income to pay off their own debts. Stocks of property companies are taking significant hits as well, dropping almost twenty percent in the past week.

Many real estate experts believe that the current declines are only the beginning, as heavy declines in the real estate sector will be seen in the coming months.

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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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