When President Xi Jinping declared last year that houses are “for living in, not for speculation”, it was the clearest indication yet that keeping the country’s housing market bubble under control remains firmly at the top of the government’s agenda. And it’s clear to see why.
According to a latest survey from analysts at global bank BBVA, a 10 per cent drop in Chinese property prices could cause a 1 per cent decline in gross domestic product growth in the short term.
A 15 to 20 per cent property price drop could lead to recession, defined as two consecutive quarters of negative economic growth.
But given the powerful intervention the government can exercise on the land, housing and credit markets, a crash, adds BBVA is “almost impossible”.
Beijing, in particular, has experienced one of the greatest housing booms ever, according to an International Monetary Fund survey, when prices in the capital peaked in 2016.
An updated report released by an International Monetary Fund last month showed average home prices in 100 major cities in China rose 16.6 per cent in September 2016 alone, compared with the year before.