China’s property bubble reaches explosive levels (Beijing property = US GDP)

[Hannah Bell]

Astronomical housing prices forced the Chinese government last week to announce a new round of measures—following two previous attempts last year—to curb property speculation. Central to the latest plan is the lifting of the minimum down payment for a second home from 50 percent to 60 percent of the price. Premier Wen Jiabao also threatened to punish local officials who failed to set and meet targets to limit rising property prices.

In addition, an experimental property tax has been implemented in Shanghai and Chongqing. Shanghai will have a 0.6 percent tax on the value of a second home, while a 0.5 percent tax has been imposed on expensive houses in Chongqing. After two interest rate rises since last October, the Chinese central bank is likely to announce further rate rises in the first and second quarters, in a bid to curb inflation and housing prices.

Last week’s announcement underscores the fear within the ruling elites that the bursting of the property bubble could have explosive economic and social consequences.

An article in China Economic Weekly on January 25 pointed out that the average real estate price in Beijing in 2010 had reached about 8,000 yuan per square metre. With a total land area of 16.41 billion square metres, the value of land in Beijing was 130 trillion yuan, or $US19.85 trillion, significantly higher than the US gross domestic product of $14.5 trillion in 2010. “That means the land value in Beijing is more than enough to ‘buy up America’,” the article stated.

http://www.wsws.org/articles/2011/jan2011/chin-j31.shtml

[xchrom]

1. hmmm - interesting.

so things don't stay put anymore -- if the experience a bubble burst -- how will the effects spread out?