There is a speculative "bubble" of some description in Tier 1 cities in China. Outside of these regions then house prices seem to be more modest - economist article last week put houses overall in China plum on average affordability.
The article uses average wages but what's average about people buying in Shanghai and Bejing? I suspect they used the avearges that made the most scary affect - national average say. Not middle class professional workers in Tier 1 cities.
Anyway, the Government want to remove the speculators and re-empahsise lower cost housing. Will they do this? No idea, but every time they fail to bring house prices down they wratchet up the rules.
In the mean time, cash deposits are large - 30% for first time buyers, 50% for people with second homes. The most likely outcome of a fall would be reduced spending power of the middle classes.
The banks have been loading up capital through 2010 ready for any fall out - I think they are aiming at 10 - 11% capital to loan value.
Developers are loaded up with cash from the last few years rises. They also did fewer projects over the winter as they saw the resolve of the PRC government. Which, ironically, led to supply / demand imbalance which pushed house up.
The goverment has release land for developers to up the supply of low cost housing - that should keep them busy. There is certainly plenty of demand for housing in China - I've seen pictures where 10's of thousands are hoping to be one of the luck ones who get affordable housing.
The law of unintended consequences are always possible but I think they have done as much as they can to make this a slump rather than a housing crash.
rich
