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China Tightens Real Estate Market

Fearful of soaring prices, China will not relax strict measures put in place a year ago to restrict its growing housing bubble. As the FT reports:

With the real estate market looking bubbly early last year, the government introduced a series of policies to rein in prices, from higher mortgage rates to restrictions on the numbers of homes people can buy.

There are signs that these measures are finally starting to bite – at just the time that the United States and Europe are on the brink of a double-dip recession.

Chinese property price increases have all but stalled in month-on-month terms and many analysts think the market is at a tipping point. With huge and rising unsold inventories, housing prices in major cities should register outright declines in the coming months, further denting construction activity and broader economic growth.

Though these restrictions are bad for much of the rest of the global economy it is a necessary measure by the Chinese to get a handle on the “Great Property Bubble”. Limiting property development will keep prices stable and ease pressure on China’s environment, which the process of urbanization is slowly destroying. But those hoping for a boost to the global economy driven by the Chinese housing boom (which happened during the worst part of the recession in 2008) will be disappointed this time around.

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