China's top property bubble prophet says prices set to soar
China’s home prices could rise by another 50 percent in the nation’s biggest cities as the latest measures to rein them in are likely to be eased by policymakers seeking to support the broader economy, according to a researcher.
The prediction was made by Zhu Ning, the deputy director of the National Institute of Financial Research at Tsinghua University in Beijing and the author of China’s Guaranteed Bubble: How implicit Government Support has Propelled China’s Economy while Creating Systemic Risk.
As measures to curb housing prices drag on growth in the second half and early next year, he said, the government would resort to its old playbook of dialling them back again to shore up expansion.
“We’re living through a bubble,” Zhu said. “If we don’t engage in more meaningful reform, which we haven’t, we’re very likely to have a financial crisis or a burst of the bubble. It’s a matter of sooner or later.”
Property prices in major cities will surge again “by another 50 percent or so” after measures to rein them in are eased, said Zhu, without specifying a timescale. Because policy makers have previously imposed curbs only to ease them again, people see them as a bluff, he said.
Last year 45 per cent of new loans went to mortgages. Local authorities have boosted down payment requirements, restricted purchases by non-residents and capped the number of dwellings that a household can own.
At least 26 cities have imposed resale lock-up periods since March, with Baoding in Hebei province slapping a decade-long ban on some homes, according to Shanghai-based Tospur Real Estate Consulting.
Zhu said he arrived at the 50 per cent estimate based on the average price appreciation after past curbs were lifted, an ever-stronger belief among buyers that housing prices will rise, China’s huge supply of credit and tighter controls on capital outflows.
Over the past year, however, Zhu, who earned his doctorate in finance at Yale, said he has had more doubts over whether the thinking of Western trained economists applies to a nation that has proven naysayers wrong “with its might and its determination” for three decades.
“Over the past 12 months my confidence has really been shaken,” he said, adding that a crisis remains probable. “Could China be the black swan that we’ve never seen before?”