Categorized | International

China Looks to Avoid Speculative Investment on Commercial Properties

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The Chinese government continues to keep a close regulatory eye on the nation’s real estate market. In an effort to reduce the risk of a housing bubble, government officials in China passed measures to essentially level off or reduce housing prices. The measure has thus far been successful, though it has caused a migration of capital to the commercial real estate market.

In order to prevent this migration and a dangerously rapid rise in commercial property values, the Chinese government is asking banks to be very stringent when analyzing risks, and especially when approving commercial property loans. Furthermore, the new measure also forbids banks from using the practice of rolling existing loans over to commercial loans.

Commercial property values have increased substantially in China since the first measure on residential properties, and the government is looking to quickly diminish the chances that commercial property values may soar.

Commercial properties were not only the only real estate sector to be addressed by the Chinese government. Residential properties in second and third level cities were also addressed. The government in China has extended the residential real estate restrictions to those cities, and is calling on local governments to impose property price caps.

All reports are indicating that the efforts from the government of China have thus far been successful. Prices and the number of sales have slowed down dramatically since the beginning of the year despite similar demands on behalf of potential homebuyers. The long-term effects of the government measure have yet to be seen, though analysts believe that China’s housing market will continue to be strong for years to come.

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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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