China Real Estate

The overheating of the investments in the real estate constitutes one of the main factors of the overheating of the economy. If one cannot guarantee the right in the dwelling of people to weak or middle income, the Chinese government should face serious social problems. In October 2004, the rise of the interest rates announced by the central Bank of China, the first time, in nine years, has réfréné somewhat the real estate investment. A lot of Chinese citizens hope that in 2005, the price of the dwelling will become again reasonable.

Boo Jun, 34 years, works in the government's office. She is always unmarried because she was not capable to save money sufficiently from her monthly salary of 2 500 yuans to buy her own lodging. Originally, she had stopped her choice on apartments situated in the west suburb of the city and whose price was of 4 000 yuans/m2, but to the second stage of merchandising of the project, the price of the apartments had climbed to 6 000 yuans/m2, what was well beyond her means. She doesn't know anymore what to do. The projects of dwelling of this type are a lot too expensive, and she is reticent to take part in the crowd for the obtaining of apartments to moderate price subsidized by the government.

On the other hand, the better affluent people are favorable to the elevated prices that are in use on the market of the real estate. At the time of a symposium in Nanjing, economist Wang Jian revealed daring forecastings in a speech that he pronounced for the opportunity:  "In a prudent manner, one can say that in ten years, the price of the lodgings in the big cities like Beijing, Shanghai and Nanjing will have tripled;  in an optimistic manner, it will have quintupled. "An entrepreneur retorted then:  "I am happy to hear these words so encouraging, but I regret of cannot have seen wind to come, I would have bought houses more."The less favored people don't share the same opinion.

For example, if Boo Jun wants to buy a lodging of 80 m2 to 6 000 yuans/m2, it means to put of side 10 000 yuans per year during 50 years. Undoubtedly, the present prices of the lodgings are raised too much in relation to the income of the inhabitants.

The prices raised in the real estate sector are caused by three main factors. The first touches the traditional belief wanting that with regard to the domestic holdings, the real estate is the best investment, because the stock actions can depreciate, but the brick and the mortar won't make it, well on the contrary. Secondly, as regards to the setting in market, the urbanization accelerated from China made increase the demand for the dwelling, and the galloping real estate promotion that the promoters do in the medias encouraged the increase in prices in the market. Finally, the third and the worse factor touches the recent published reports according to which some foreign investment organisms would have injected" in a hidden manner" of strong sums of money in the Chinese market of the real estate, generating a real estate bubble thus in China. The report concludes that the development healthy of the Chinese real estate market would have been influenced therefore by this foreign organism whose intention was to create a real estate bubble representing very lucrative repercussions.

General rule, a sector having a healthy and steady growth is not the witness of a social investment influx in a short period of time, because such a situation indicates a luck increased of fluctuations within the sector. At the end of November 2004, the institute of research economic of the state Commission for the development and the reform published a titled report:  To adjust the monetary politics and to alleviate the constriction of funds. The report reveals that more than 100 billions $US of floating funds coming of the stranger entered on the Chinese continent. He declares:  "To the first semester of 2004, the foreign debt increased 16%, to reach more than 200 billions $US, and 50% of this one are a short-term debt of a nature similar to this floating funds. "According to statistics, the real estate is a pole for these foreign floating funds.

Since five years, Hangzhou is classified to the third rank for what is the rise of the price of the lodging among 19 cities and townships raising provincial and prefectorial authorities. Since 1999, the real estate market of Hangzhou knew an increase of the investments and sales, and the local consumers continued to show a strong spending power. The growth rate of the prices was of 30% these last five years.

To cool the real estate overheating, January first, 2004, the township of Hangzhou began to discern 20% of business tax on the purchase of second lodgings hand. However, this politics ended following September 1st. Paradoxically, this tax encouraged the increase in prices, because the sellers repaid under the table the amount of the tax to the purchasers.

The case of Hangzhou demonstrates the necessity of a landing smoothly. The economy of the market is an organic economy, within which the setting up of some prompt policies doesn't manage to solve particular problems. It is necessary to achieve a landing smoothly of the economy to contain the general economic overheating.

Currently, 72% of the city-dwellers possess their lodging, and a lot of people estimate that a decrease of the real estate prices would generate some losses, especially for those that borrowed money from the bank. But, general rule, all understand that the prices of the real estates must be curbed, especially when one wonders that Hongkong was the epicenter of the financial crisis in Asia.

As doctor Yin Zhongli of the academy of social studies of China said it:  "Short-term, the real estate speculation can stimulate the economic growth indeed, but long-term, this stimulation looks a lot like an overdraft and cannot create a real economic prosperity."