China Is Desperately Reinflating The Real Estate Bubble

china real estate

Photo: (AP Photo/Muhammed Muheisen)

Yesterday we have noted the noticeable change in government actual policies as oppose to what they have been saying (to be clear though, the subtle changes have been noted for probably a bit longer).

In particular, even though the Chinese government has been, for years, telling everyone that they are serious in trying to curb home prices, it is now becoming clear that because rising home prices and inflation are what make Chinese ruling class gain personal profit, they are now giving up on real estate market curbs already.

In fact, not only have they been fine-tuning real estate policies mainly at the local governments level, they have started cutting lending rates, as we have all known. Between attempting to maintain high growth and letting the economy to adjust, the government speaks the latter and does the former.

As a result of all these subtle changes in languages and actual policies, it seems that the real estate market is heating up again in various cities.  Now we are seeing queues in property sales office again in Beijing, Shenzhen and other places as people seem to believe that as the tightening is over, real estate prices will rise again according to Sina.   As we said yesterday, that this is rather pathetic as the government seems to be hoping that speculators will come in again to save the economy.

Deutsche Bank’s China property research has become rather excited now, claiming that the real estate sector now has the “best industry fundamentals in three years”, so it is now time to BUY BUY BUY BUY BUY property stocks:

In the past three years, government tightening, weakening housing affordability, slowing sales, rising inventory, and tight financing for developers have been five key investor concerns on China property. However, since March 2012, four of these concerns have cleared as the fundamentals of the China property market continue to improve: 1) government policy direction shifted to “loosening”; 2) sales volume continues to recover after price cuts; 3) inventory situations have improved; and 4) housing affordability has strengthened. This should help drive more meaningful valuations re-rating for property stocks.

Of course, whether loosening policy will ultimately be successful in reflating the economy is another question that we shall explore later.  Do note that this Deutsche Bank’s report has absolutely no mention on Euro zone crisis and Greece exit.  Yeah, people here either have no idea or don’t care.

This article originally appeared here: As the Chinese government gave up, the real estate market goes crazy
Also sprach Analyst – World & China Economy, Global Finance, Real Estate

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