The Chinese government hiked interest rates and tightened limits on bank lending and mortgage availability in an effort to tame inflation and prevent a stimulus-induced housing bubble from bursting, and The New York Times notes that China’s real estate market has now begun to cool at a rapid pace:
One of the world’s few remaining real estate bubbles finally seems to be losing air. Real estate transactions have slowed so quickly that in the last two weeks, brokerages across China have laid off thousands of brokers and closed hundreds of offices.
News media have reported on at least five street demonstrations in Shanghai since Oct. 22 as early buyers in condo projects have protested discounts offered to later buyers, even breaking into sales offices and smashing models of the buildings and apartments.
A 32-year-old protester said that he and his wife had paid $173,000 last January for an 850-square-foot apartment in a building on the outskirts of Shanghai. But the developer later cut the price for the remaining units of this size in the building to $124,000, wrecking the resale value of the condo.
To add insult to injury, the building is not scheduled to be completed until May.
AFP is reporting that cash-strapped developers are offering a series of enticements, including luxury cars, to lure potential apartment buyers. Today, The Diplomat’s Mu Chunshan placed China’s housing bubble in the context of broader economic uncertainty and the European debt crisis:
Europe is the largest single market for Chinese exports, and the crisis in Greece and Italy will naturally put pressure on China’s economy. Indeed, figures released today already show China’s exports rising at their slowest pace in two years. To protect growth and prevent a hard landing, China may consider easing monetary policy, a move that would risk exacerbating the
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