The top economies of the world, the U.S. and China, are so busy with their trade war that they completely ignored the other pressing challenges. China’s real estate market is the biggest threat for the country’s economy than the oil trade war with United State. In fact, experts believe that property is the country’s biggest risk in the next 12 months.
Larry Hu, the head of greater China economics at Macquarie, stated that he has been observing the real estate and smaller cities will see a slump in prices. In China, real estate investment accounts for more than 66 percent of Chinese household assets. Moreover, the property market plays a vital role in local government revenues, corporate investments, and bank loans. Thus, a sharp downturn in the real estate market will have a negative effect on the economic growth of the country.
Till now, the property market has been hot. The mean selling price for brand-new non-governmental housing rose 28.1 percent from the beginning of 2016 to May 2018. Furthermore, the overall domestic property prices have been rising since last three years, according to the National Bureau of Statistics data.
Trade War Effects
Last week, Nanjing announced a ban on corporate purchases of residential properties. Before then there were speculations regarding a similar strategy adopted by Shanghai and other cities. Maybe these are worthy strategies to control the risk of real estate. CNBC reported that Joe Zhou, the regional director of investment management firm JLL, believes that the Chinese government is not likely to relax its policy any time soon and the prices could go down on average.
On the other hand, it is hard to guess whether a downturn in Chines property market would impact of the overall growth in the same scale or not. Meanwhile, the U.S. is pressuring the country with new strategies by imposing tariffs on importing. During these times of trade war, for now, China’s economy is stable, however, the government should look at their real estate market regardless of the increasing pressure from the U.S.[The views and opinions expressed in this article are those of the authors and do not necessarily reflect the views and/or the official policy of the website. ]