Baloney of house prices
Media reports that the prices of new homes in major Chinese cities are plummeting at double-digit rates amount to nothing more than bunkum and wishful thinking.Well, sure, why would anyone believe any numbers out of China? (Especially housing developers desperate to raise funds on the world market.) So, sure, we'll go with you on this for the moment.
China's rocketing housing prices are so unpopular nowadays that they are blamed for delaying marriages and depressing Chinese consumption.Obligatory the People's Government Feels Your Pain paragraph?
After several years of vain attempts to rein in housing price hikes, the Chinese authorities have at last come to the obvious conclusion that a substantial increase in the supply of cheap houses will do the job.If this is the official line, China is in worse shape than previous worst imagining. The high end bubble propelled by the burgeoning cash in the hands of 700,000 newly minted millionaires and the housing needs of workers making $3000/year have no market intersection. The workers are not in competition against the wealthy for houses. This is like claiming caviar prices are high because there is a shortage of hotdogs.
Now, there is, in theory, competition for land and developers. But, in reality, the economics of that have become intractable.
Developers are now nothing more than profiteers selling to the ultra wealthy. They are not going to voluntarily back down to building modern high-rises that will be rented for a few dollars a week. They are not going to obediently scale down to charity work. And charity is what it will be, especially given the record high cost of building supplies. The Politburo is going to need a bigger stick to compel these companies to ignore market forces.
They've tried cutting off their oxygen supply, but given a choice between developing at a huge loss or ceasing business, real business people will simply quit and change their business. So, I don't even think the intersection of these two markets exists at the land/developer level either. Not in reality.
Given that China has already made it a top priority to fight inflation with tightening measures, the stabilization and then slump in urban house prices will be a sure bet as long as those subsidized housing units are constructed as planned.Wait, what? It's scandalous that anyone would imply house prices are falling, but hey, falling prices are a sure bet, yippie?
Lack of supporting policies to encourage private investment and the difficulties local governments face raising enough money for subsidized housing projects are understandable. But that does not mean misleading media reports about falling property prices can be made an excuse for local governments to drag their heels over building government-subsidized housing units.OH SNAP. Here we are. Forget the rest of the article, this is the meat right here. The message from the government is we think you are lying about house prices already falling as a way to weasel out of our five year subsidized housing plan, but that's not going to work.
It is estimated that the country needs to spend about 1.3 trillion yuan on these housing projects, with more than 500 billion of that coming from the central government and local governments.Yeah, more propaganda, whatever. Too little too late anyway.
This will certainly be a huge financial burden on government coffers. But if this is the price to avoid a disastrous property bust, it's worth it.