In what could be seen as a splitting image of Australia, young Chinese is struggling to get into a housing market fueled by speculation.
The AFP reports “The boom has been bolstered by easy bank loans, tax breaks and a lower down payment threshold, introduced by the government in the past year to support the real estate sector, a key driver of China’s economic recovery.”
But there are now fears much of the China Government’s 586 billion dollar stimulus package has been spent in asset markets such as housing, only leading to a speculative bubble.
Just like in Australia with the government removing the First Home buyers boost, “Fears that policymakers might withdraw these measures next year to dampen speculation have also triggered a round of what analysts call “panic buying”, further fuelling the price surge and increasing stress for younger Chinese.”
The Chinese Government has reported it plans to squash speculative home purchases. From next year, “individuals selling their homes will only be exempt from paying a 5.5-percent tax after at least five years of ownership, instead of the current two.”
The AFP articles comes a month after a report on Al Jazeera about an empty city call Ordos. The city was built by the government in 5 years and will house 1 million people, the only problem is it’s empty – No one lives there.
It is believed the motivation behind building the city was to support GDP. Most of the homes have been sold to investors, but few have been rented out. The Chinese have never seen a property crash, hence housing is seen as a safe investment, a place to park their cash even though there is no rental income or return. The real Ordos is an old city 30km away. Most residents here plan to move to the new Ordos one day, but at present prices are too high to sustain an economy there.
There are also reports of large commercial office towers which sit empty in other parts of China. Many of the towers which would have little change from a Billion dollars, earns no rent.
Australia is hoping China’s continued GDP growth will support it in years to come.
» Young Chinese groan at skyrocketing property costs – AFP, 13th December 2009.