Skip to comments.China Releases New Measures to Restrict Housing Sales
Posted on 03/31/2013 6:33:13 AM PDT by Olog-hai
Trying to cool down the resurgent property market, two of Chinas biggest cities announced over the weekend that they would put in place a series of restrictions and penalties on housing sales.
The announcements came a few weeks after Chinas State Council, or cabinet, said the government would take stronger action to ensure that property prices do not continue to soar, fueling what many analysts believe is a real estate bubble that could seriously damage the economy and exacerbate social tensions between the rich and the poor.
(Excerpt) Read more at nytimes.com ...
zer0 holds his chin and pensively thinks ‘...restrict home sales...yes my eastern masters have given me the germ of an idea...’
I heard that you can only have one house, and if you have two, and they find out, they will make you destroy it...
That’s children, never mind.
Another example of government involvement in capital markets mucking things up. The communists in China retained control and influence in banking. At government behest huge amounts of capital was directed to the construction of entire cities of apartments, retail, commercial and common use buildings. They sit empty and deteriorating. Over a trillion dollars of capital have been squandered. Meanwhile, while these empty, useless buildings deteriorate, existing real estate, especially urban sites, are priced artificially high. Those pseudo values are used by the banks as a basis for more loans. Sound familiar? Very unlikely the Chinese can deflate that bubble without a lot of pain. Be very wary of investing in China.
Let’s give them Barney Frank & Dodd to help fix it.
Those houses have already been bought. Their real estate bubble is larger than ours. The Chinese government is actually trying to pop the bubble before it takes them down like the US or Europe, but it is already larger than California's bubble.
Oddly enough, this is causing another real estate bubble in the US. Chinese and Europeans are buying American real estate in order to park their money in a safe country. California real estate prices in some areas have largely recovered from the crash in the last two years, on the strength of foreign buying, while the California economy is still stagnent.
It isn't forbidden. The Chinese government is fully aware of the property bubbles in the US and Europe, and is trying to pop theirs before it crashes their economy, but unfortunately, it is already well past where ours was when it popped. Theirs is proportionately a bigger bubble.
Yes, they should be selling those houses if they can, but there is a bubble psychology at work there just like there was here. We can see this far more clearly than the average Chinese can because we have just been through a property crash. If you think about the crazy logic that was going around before the bubble crashed, that housing always goes up, they aren't making more land, etc, etc, that logic is over in China, but on steroids. In addition, there is a powerful sexual motivation, because Chinese women will not marry a man who doesn't have a house.
There are Chinese who know this is not going to end well. Many are trying to move their money out of the country. Rich Chinese have been buying California real estate for the last couple of years, and have pretty much put California back at pre crash valuations.
The new measures take effect today, the official Xinhua News Agency reported yesterday. The city will also enforce a 20 percent tax on capital gains from property, it said. Current rules allow each household with a Beijing residence permit to buy a second home, opening the way for couples to divorce on paper to double their ability to invest.
People are getting a divorce so that they can be allowed to buy another house. Oh yes, they are in a bubble.