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On the Recent Rise in China's Real Estate Prices

Author

Listed:
  • Ichiro Muto

    (Bank of Japan)

  • Miyuki Matsunaga

    (Bank of Japan)

  • Satoko Ueyama

    (Bank of Japan)

  • Tomoyuki Fukumoto

    (Bank of Japan)

Abstract

Real estate prices in China have recently risen sharply, especially in urban areas, and the Chinese government has implemented a series of measures to prevent the property market from overheating. In terms of the genuine demand for property and the levels of leverage in the private sector, the current situation in China's real estate market resembles that of Japan in the early 1970s, when property prices surged dramatically due to"the plan for remodeling the Japanese archipelago." Although real estate prices in Japan dropped after the first oil crisis, they soon resumed an upward trend. The upward trend of real estate prices was supported by the strong housing demand accompanying urbanization, and the fact that there was no significant pressure of balance sheet adjustment since the leverage levels of both the household and corporate sectors were quite low. Since China today is characterized by the same two factors, it could be argued that if there should be a downward adjustment in China's property market in the future, it would not be as severe as the bursting of the bubble in Japan in the 1990s. However, there are some factors in China that did not exist in Japan in the early 1970s that could lead to overheating in the property market, such as local governments' strong incentive for real estate development and the influx of speculative money from overseas. It is worth monitoring how these factors and government measures influence China's real estate market.

Suggested Citation

  • Ichiro Muto & Miyuki Matsunaga & Satoko Ueyama & Tomoyuki Fukumoto, 2010. "On the Recent Rise in China's Real Estate Prices," Bank of Japan Review Series 10-E-3, Bank of Japan.
    • Handle: RePEc:boj:bojrev:10-e-3
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    File URL: http://www.boj.or.jp/en/research/wps_rev/rev_2010/data/rev10e03.pdf
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    Citations

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    Cited by:

    1. Mylène Gaulard, 2013. "La hausse des salaires en Chine et au Brésil depuis la crise de 2008," Post-Print halshs-01025742, HAL.
    2. Guo Xie & Kai Li, 2023. "Does resident leverage volatility affect corporate profitability?: An empirical study from Chinese A‐share listed companies," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 44(3), pages 1656-1668, April.
    3. Mylène Gaulard, 2014. "La burbuja inmobiliaria en China," Post-Print halshs-01086912, HAL.
    4. Tomoyuki Fukumoto & Ichiro Muto, 2012. "Rebalancing China's Economic Growth: Some Insights from Japan's Experience," China & World Economy, Institute of World Economics and Politics, Chinese Academy of Social Sciences, vol. 20(1), pages 62-82, January.
    5. Mylène Gaulard, 2014. "Les dangers de la bulle immobilière chinoise," Revue Tiers-Monde, Armand Colin, vol. 0(3), pages 77-96.

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