Categorized | International

China Fears Growth of Commercial Property Bubble

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Over the past few months, the Chinese government has acted swiftly to avert the rapid growth of a residential real estate bubble. While the efforts on behalf of the government have thus far been successful, it appears that a new bubble is now forming in the country’s commercial real estate market.

As a reaction to the stringent restrictions imposed by China’s government on the housing market, many residential property developers within the nation are opting to increase investments in the commercial property sector. Although commercial real estate prices hadn’t yet for some time started to see the substantial increases once seen within the housing market, they are starting to experience them now.

More than one trillion yuan has been invested into commercial real estate in China this year. That number, which is an increase of more than two hundred and fifty yuan from last year, is expected to grow even further next year.

Residential real estate property developers are not the only ones looking to invest significant sums of money into the commercial real estate market. Insurance companies in China have expressed strong intentions of investing into the market as well.

With increased demand among residential real estate developers and insurance companies, prices on such commercial sectors as office space and shopping malls have started to skyrocket. The skyrocketing prices, in addition to a low investment yield indicate that a bubble may have formed in the commercial real estate market.

It is believed that the Chinese government will react to the formation of a commercial property bubble in the same manner that they did with the housing bubble. They government has already advised banks to set more stringent criteria as to who is able to receive a commercial property loan.

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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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