As the property market in China continues to soar, the Chinese government has set about implementing rules in further attempts to slow the market. Though they have put some gateways in place, those with stronger spending power may easily overcome those hurdles. Perhaps to speed up the cooling process, the authorities have placed a limit on the number of new home loans issued by banks.
Up to 35 per cent of bank loans in the first half of 2016 were from home loans and by August, the numbers have jumped to almost 71 per cent. Even as home prices rose, and rapidly, more were jumping onto the bandwagon, perhaps in fear of prices rising even further.
With a national population of more than 1 billion and growing, the government has a huge task in managing housing and an ageing population. While the property industry has boosted China’s economy, helping it to grow by 6.7 per cent this year, should property prices continue to rise, the country may be facing a diminishing capital reserve while struggling to manage credit risks and a possible sudden collapse of the property market with sudden fall in home prices which may put many out of a home, in debt and the banks in big trouble.
Within the country, 21 cities have already set their own property cooling curbs such as limiting the number of multiple property purchases to clamp down on property speculation and increasing the down payment. As the regulations change, more mainland Chinese are looking for property investment opportunities outside of China and Hong Kong is one of the first places they focus on. As more countries savvy up to the purchasing practices of the Chinese, such as Australia and Singapore, their eye-line may shift to emerging South-east Asian countries such as Vietnam, Cambodia and Laos.
