Possible Contributing Factors

Problems raised in the property sector are significant for a country’s sustainable development. Therefore, several categorized contributing factors causing the property bubble in China cannot be underemphasized.

(a) Catalytic factors

Frankly speaking, the increasing tendency of urbanization is the beginning of the overall issue amongst the property market. The accumulative number of people who come to stay in the cities leads to the booming economy in China, as well as the heating real estate market. Moreover, personal income has grown dramatically since the urbanization, and people become more elastic on money expenditure. Not only can people buy dairy commodities, but also invest in stock and property markets to obtain returns.

However, things could go wrong if the markets are not well balanced. Excessive investments have led to the credit crunch amongst the property developers themselves in the recent decade. By observing market profitability, a number of speculators enter the real estate market and make sizable returns by short-term buying and selling, resulting in investment demand driven. Unfortunately, people are usually too hubris about their own abilities and extrapolate past trends into forecasting, resulting in massive property bubbles in the end. Even worse, losses could also drive investors irrationally risk-averse, which may cause dramatic price drop when the bubbles burst. 

(b) Governmental factors

After the global financial crises triggered in 2008 particularly, the Chinese government mandated to lower the interest rate and increase the bank lending. Furthermore, there are huge incentives for local governments to escalate land prices and sell them to enlarge their fiscal revenue, as land sales account for up to 50% of the revenue. Unpredictably, this may lead to a continuous excavating of land, and deteriorating our natural environment in the meantime.

(c) Cultural factors

In my point of view, cultural pressure on the new marriage generation cannot be underemphasized in booming the property bubble in China. Owning a property is one’s asset and it gives us people a sense of safeness and belonging. Men work hard in order to secure their property assets whilst approximately 70% of women consider owning at least one property as a prerequisite before men ask for their marriage. This realistic consideration for both men and women then lead to the deterioration of the property bubble, particularly in major eastern cities in China.