Categorized | International

Falling Real Estate Prices in China Cause Mixed Reaction

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As China’s government continues to stand by its real estate restrictions, many are questioning as to whether or not their policies are damaging the country’s economy. Others, though, believe that the policies are necessary to prevent the bursting of a potentially more devastating bubble.

China’s government imposed restrictions on housing sales in an effort to control what was considered to be an unsustainable growth of pricing. The housing market was quickly becoming unaffordable for middle class buyers, and as such, the government believed that housing reform was necessary.

The restrictions have been incredibly effective at keeping prices down, as they have actually decreased in the past few months as a result of the restrictions. Real estate experts are divided as to whether or not the declines are good for the country’s economy.

Some analysts believe that a mild crash now will prevent a far greater housing market crash in the future. Those analysts believe that the current policies are essential for the overall health of the Chinese economy. On the other hand, other analysts believe that the current drops that have occurred in the housing market are minimal compared to what is to come in 2012. They believe that housing prices will drop by as much as forty percent in the next year.

Such a decline in the housing market in China will likely cause a ripple effect that could negatively affect economies across the globe.

As the debate as to the effectiveness of China’s governmental policies continues, there remains the uncertainty as to how long they will remain in effect. The Chinese government has stood behind their policies, though there is no indication as to whether they will continue to act as such if housing prices fall as much as forty percent in the next year.

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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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