Something curious was noted this morning on CNBC Europe: namely a reference to an article in the Shanghai Financial News, according to which China is quietly (or not so quietly) trying to orchestrate a 30% drop in real estate prices, in the form of a “Thunder attack” which combines increased purchase costs, property taxes as well as the rise in interest rates. If proven true, this is a major flashing red sign of just how out of control inflation, especially property and real estate, is in China, and that future CPI readings (not the official Politburo number, but that which people actually have to live with) will be getting progressively worse. Also, for the government to step in with such a drastic measure, it must mean that the discontent on the ground must be approaching a fever pitch.
From Shanghai Daily News (apologies for the Google translation from simplified Han – we ask any native readers to provide a better translation):
Regulation has been to attack the third round of first-tier cities real estate prices down 30%
Thunder attack the third round of real estate regulation, the rapid combination of boxing, so property prices forced counterattack, a few days could not proud of the real estate business and speculators by surprise. This time, a property “hot pot” of the “lid” was covered up.
Increase purchase cost, the purchase of, property tax, this three-pronged approach, if implemented in place, the actual interest rate has been through administrative restrictions and basically blocked the tax price of the property market investment (speculative) demand.
That property prices continue to rise, “lid” was tightly closed out. At the same time, “further implementation of local government” and “the construction of housing projects to increase security efforts”, the attempt to increase the supply of low-rent housing on the market, “pot” to root of the problem.
After this shot of a combination of boxing, I believe that covers “lid” will directly effect. Property market turnover will be greatly reduced, as the CPI is likely to continue to promote further interest rate rise, real estate holding costs will continue to increase, investors who own multiple sets of housing will withstand the pressure to sell vacuum, once the panic selling a conservative estimate, prices have to appear about 30% pullback.
New “state of eight” and the property tax was intended to curb property speculation, if the effectiveness of control there, holding costs sharply, but more substantial price correction, then the past 10 years, the emergence of many hundreds of millions of Chinese cities, million “property rich” will be their colors.
It is true that the local government to increase efforts in building affordable housing projects, the author is not optimistic, because the event of a fall in property prices, local government finance will decrease the land, local government expenditure in the expanding case, expect them to spend more money for housing support, which is obviously unrealistic. Only a few strong ability to govern the city, it is anticipated to increase in 2011 the so-called efforts to protect the room is still on paper. >> Read More