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*BY JIM FLINK*
Is the bubble about to pop? The cost of housing in China has become the country’s number one economic headache. And for now, it appears the Chinese government has no concrete answers for how to fix the high-rising issue. How bad is it? Take a look.
*“This is what 2.27 million dollars buys you right now in Shanghai. Three bedrooms across 195 meters or a little over 2000 square feet **... it has a great view of the financial district...” *(Via CNN)
For the better part of a decade, prices in so-called Tier One Chinese cities — Beijing, Shanghai, Guangzhou – have been exploding. Forbes notes:
*“Of the 70 major Chinese cities tracked by NBS, 67 saw home prices increase in April compared to March, with the highest growth rate at 2.1% … rising prices led the government to issue a guideline to tighten its grip on the real estate sector, raising taxes by as much as 20% for transactions.” *
And unlike in the U.S., China measures its GDP not by what is bought or consumed, but in what is built.* *That puts an ever-growing pressure on the state to continue building.
Even if the buildings go unused. Outside the Tier 1 cities, entire blocks of skyscrapers lie vacant. They’ve been dubbed China’s ghost cities — a phenomenon recently detailed by CBS’s 60 Minutes.
Year-over-year prices are up 6%, 8% and more. One Wall Street Journal analyst notes, when it comes to solutions, governmental policy talk has been cheap.
*“I think in both the case of Shanghai and Guangzhou, they said we will implement them but they didn’t put a time frame around when that would happen. My expectation, our view is that this is going to change very soon.”*
Some analysts liken the housing problem to that in Japan during the late 1980’s. They suggest China would do well to address the situation before the bubble does long-term or even permanent damage to the entire economy.
Business Insider suggests:* “A good start would be to introduce a property tax, imposed annually, that is based on the market value of a home. That would reduce speculation, discourage owners from holding empty flats and provide a fresh source of funding for cash-strapped local governments.” *
News.com.au reports, China is building an average* *of 12 to 24 new cities each year. Reported by Newsy 9 minutes ago.