My motivation for this research topic is raised from the economic anomalies in the Chinese market today due to the hidden booming property bubble that might burst in the near future.
A property bubble, also referred to as housing bubble for residential market, stands one of the most substantial economic concern that occurs periodically in the global property markets. It is characterized by prompt rises in the valuation of real property until it reaches an unsustainable level resulting in a dramatic decline in housing prices.
Generally speaking, the property sector in China is now cooling down after the housing mania has been faded. Bottelier (2010) demonstrated that urban house prices experienced a substantial increase of approximately 30% per year in major cities in China from 2002-2006 averagely, although there occurred to be a high number of unoccupied residential or commercial units (housing vacancy rate). According to the National Bureau of Statistics of China (NBSC), for instance, the property prices in Shanghai increased by over 150% from 2003-2010 with a dramatic price drop at the end of 2010. Furthermore, with regard to the updated property price index for 2012, it is worth noting that the price-to-income ratios are 1/28.64, 1/30.36, 1/41.15 in Beijing, Shanghai and Shenzhen respectively; whilst the price-to-rent ratios are 1/27.07, 1/36.12, 1/28.15 in the centre of the three major cities above. These statistical figures do not seem to be optimistic or even reasonable for a country with high GDP growth in the recent decade.
My research questions are therefore raised as below. To start with, is there any possibility that the problematic property circumstance in China would follow the property bubble developed in Japan from 1982-1991? Secondly, will the property bubble in China burst or deflate in the near future? Finally, if the property bubble in China is to be deflated, then what will be the effective government actions compared with Japan and the United States?
Good point.
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