The Chinese property bubble problem

The Chinese property bubble problem is becoming the most serious “disease” of China’s economy. The figures indicate that from 2004 to 2009, the real estate prices doubled in 35 major cities in China, for example, the price in Shanghai increased by 150% during that period. The bubble exist both in residential and commercial real estate.

Real estate bubble is a kind of economic bubble that causes the long-term rapid increase in real estate prices which result in the market transaction price that far surpasses their actual value. In the past 20 years, there has been three cases of the influential real estate bubble worldwide, namely the Japanese in 1991,the Thailand and other southeast Asian countries estate bubble in 1997 and the estate bubble in 2007 due the U.S. subprime mortgage crisis, with ripple effects to those countries and the world economy.

The emerging, developing and bursting of the real estate bubble have its regularity. The price continuing to increase in a time period, which drives people to expect the price to go higher. Thus, to avoid higher bidding price, a number of new bidders come in, they want to buy the property earlier, however, making the real estates more expensive, and the prices rocket up. When the bubble overexpands to an unbearable level, it will burst, as a result, the economy and the market turns from booming to recession, with serious economic problems. The property bubble problem is a vital subject for Chinese government which can not be neglected and must be taken seriously.