Earlier in the year, China essentially called a halt to all fundraising on the part of real estate developers in an attempt to “calm the property market” and prevent the formation and burst of a real estate bubble. However, the developers themselves, along with other critics, claimed that this was largely a ploy to take over development in the country since people with connections within the government could still get funding for their projects. Last week, senior officials at the China Securities Regulation Commission confirmed that the stringent regulations are still in effect, stating that “All refinancing applications from listed developers have to be approved by the Ministry of Land and Resources”[1].
With banks within the country ordered to slash their lending to real estate firms, many Chinese developers have opted to sell their debt offshore. China responded to the continued development and construction by limiting multiple home purchases and raising mandatory down payment requirements. Not surprisingly, stocks for developers are falling as their activity levels decrease and their futures appear more and more uncertain thanks to “concern…on further tightening in China,” said chief operating officer at KHI Asia Ltd Ben Kwong[2]. “Investors are worried there will be further measures to regulate the overheating of the property market.”
Do you think that China is doing the right thing by trying to regulate and restrict its housing bubble out of existence? Is this even possible?
Thank you for reading the Bryan Ellis Real Estate Letter!
Your comments and questions are welcomed below.
[1] http://www.reuters.com/article/2011/04/15/china-developers-idUSLDE73E18320110415
[2] http://www.bloomberg.com/news/2011-04-18/hong-kong-stocks-drop-as-developers-fall-on-tightening-concern.html
