What is the link between the Chinese real estate and China’s economy?
Real Estate sector is one of the driving forces of an economy, Chinese economy is not exceptional, the phenomenal growth that has been experienced in the past few years is greatly attributed to this industry. In the last few months, the sector has experienced some shrinkage, with the number of houses sold and bought across the country and more in one of the most important cities;
Shanghai has seen a sharp decrease. Experts have said that the prices in the said period have slightly gone down but we are not in yet what they described as a housing crisis. All in all the fact that the demand for the houses whether office blocks or apartment has been down and the prices has also dipped in an indication of a trend which experts would raise the red flag.
A real estate market bubble?
There has been a debate on whether the Shanghai real estate market has reached a bubble and speculations on when it would burst. While the housing prices have fallen in the last few months, experts agree that we are yet to get to the burst, the prices of houses and rent prices might stabilize very soon, but this is not a guarantee. Those who would like to make a gain are advised to make a kill not, buy when the prices are low and either retain the product or sell it when the prices start rising.
The players in the industry are not worried about the falling prices, a cross check on the apartment prices in the city will tell you that the prices are still higher, what has actually dropped in the volume of transactions. The fall in transactions across the city has been recorded as thirty three percent in the first half of 2014. This is a high rate given that other parts of the country experienced a drop of transaction at a rate of nineteen percent. Although the prices are high, experts point out that they will eventually come down citing the shrinking demand as the main reason for the downward trend.
Experts point out that the current trend is not similar to the previous market corrections which has mainly be as a result of government intervention. The market is the real driver in this situation. The main course of the trend has been identified as the slowing of the Chinese economy. When people do not expect the housing sector to perform so well in future, they tend to slow things down, explaining why the demand has been on a downward trend.
The government this time unlike in previous occasions, has steered off, there has not been any policy on changes that might affect the sector. It is only recently that the Shanghai authorities introduced stringent policies which were meant to curb the house prices. The municipal authorities raised the minimum down payment for a second apartment or house purchase to seventy percent down from sixty percent. The non shanghai residents were also affected by the tougher rules making it hard to buy houses in the city.
One solution to bypass the problem
Most of them turn to rental agencies. This could partly explain the scenario that is being experienced right now. As the economy decelerates, it is important to check on the trends in the housing sector and get to understand how one can gain from the current situation. In real estate market, the trick lies in buying low and selling later at a higher price. While it is not certain as to which direction the prices will take in the near future, it is important that one weighs out the options as far as real estate in Shanghai. The current correction may not last long, given that there are no government bails this time.
More information on rental housing in Shanghai: http://www.cozyrent.com