I started this blog in June 2007 asking these questions: Are we in a massive asset bubble that will blow up in our faces ??? - ANSWERED YES ! Is western and particularly British society on the verge of social collapse??? What are the best common sense long term investment strategies to keep you rich? When will consumption/debt bubble economics end and a real savings/production economy begin ???

Saturday, 27 March 2010

China property: Biggest bubble in the world

Beijing has unleashed another round of property market tightening measures, and this time it's tightening mortgage loan terms considerably: The mortgage interest discount has been reduced for first-time homebuyers; the discount has been abolished and down payment requirement raised to 40% for second-time homebuyers; and rates are at banker discretion while the required down payment has been raised to 60% for third-time buyers.

Predictably, sales volumes in the primary and secondary markets have collapsed. But no one is panicking, not even those who live off the property bubble. Why? Aren't they supposed to be terrified when Beijing cracks down?

It seems we have seen this movie before. Beijing launched property-tightening measures several times in the past but then relaxed them as soon as the market felt the bite. The bottom line is that local governments, and Beijing through them, depend very much on property for fiscal revenues. And now, the market does not believe the government will cut off the hand that feeds it.

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