China's Thin Margin for Error in Property Policies

Amid growing concerns about the economy and the collapse of the , there are added worries that China’s campaign to deflate housing prices will go too far. While Beijing has eased credit policies to regulate inflation, they have kept a hard line on their housing policies. Bloomberg Businessweek reports:

“The decision has been made that there will be no more property bubble,” said Andy Xie, an independent economist based in Shanghai.

Measures to control the market — such as limits on home purchases and high downpayments to qualify for mortgages — are at a “critical period,” Vice Premier Li Keqiang said last month, stressing a need for more progress on controlling prices.

Nobody is predicting a meltdown akin to those that led to the global crisis: most Chinese homeowners hold relatively modest mortgages, and demand in the long run will be sustained by demand for better, more spacious housing among increasingly affluent families.

The easing in property market controls, when it does come, will likely be piecemeal and low-key, as is the case for most Chinese economic policy changes, says UBS economist Jonathan Anderson.

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