Bubble Logic: We Admit Chinese Property Prices Are Way Too High, But They Can't Fall

China Skyscraper Village

Here’s an example of the expectations that keep inflating China’s property prices despite recent measures by the government to clamp down.

Prices can’t fall substantially…

China Daily:

But Wang Juelin, deputy director of the policy research centre of the Ministry of Housing and Urban-Rural Development, said he does not expect housing prices to decline drastically this year after dramatic increases in the latter half of last year. Niu Fengrui, former director of the research centre for urban development and environment at the Chinese Academy of Social Sciences, said the government’s tightening policy has led to a stagnation in housing prices.

Even in the long term, prices are unlikely to “experience a big fall,” he said.

Even though they are ‘too high’…

“Housing prices are too high, and the public will lose confidence in the government if rocketing prices keep shattering the common people’s dream of owning their own apartments,” Wang said. Housing prices are not only an economic issue but also political, he added.

As long as people don’t fear major price declines, despite admitting to sharp price gains already, then bubble logic survives. It will be truly an amazing property market if prices sky-rocket, then merely flat-line rather than fall… a volatility la-la-land where major price moves only happen to the upside.

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