Detail analysis of China's realestate problem

From the diagrams concluded last week, we are able to get an overview of the current situation of China’s real estate bubble and a cause of concern for China’s society and economy.

The high selling price that far exceeds the income of an ordinary family that could not afford a house, especially for those who just graduated and need to build a new family, so they have to apply for loans, as a result they have to use most of their salary to pay back the loan. This group of people is called “mortgage slave” or “house slave” in China, and the number of them are increasing. What’s worse, the selling price is still rising or remains at a high level in most cities in China. In order to buy houses, the saving in the bank decreases sharply as the money in the bank are moved from the accounts to pay back the loan. However, the mortgage loan in China increases very fast within the past 10 years, on one hand, ordinary families have to get the money to pay back. On the other hand, investors loan the money to build more houses. This is a potential danger for the bank.

However, some people may ask, as the newly constructed houses increase every year, why are the prices still so high? This leads to another problem, some rich individuals or institutions, both from China and overseas, they buy a lot of houses from the land agents and keep it vacanct, not for the purpose of living, but for investing, more precisely, for speculation. They cause the scarcity of houses in the market, so people who are in real need of houses have to buy from them at a higher price. Moreover, as the land agents and speculators generate large amount of income, they have to pay a high amount of income tax to the local government, become big contributors to the government's income, to some extent, causing the regulation of the government to become ineffective and inefficient.

If the situation gets worse, one day the bubble will burst, with disastrous chain reaction. Generally speaking, the economic problems includes the abnormal economic structure, the bank crisis, the financial crisis, the production crisis and consumption crisis. As factories are closing down, the unemployment rate increases, this leads to the surge of crime rate, the instability of the government and the general unrest of the society. In conclusion, the deteriorating economy always results in serious political and social crisis.