Business / Industries

Predictions of China's property bubble bust premature

(Xinhua) Updated: 2014-02-26 11:24

A potential homebuyer takes a photo of a property display model inBeijing. [File photo / China Daily]

BEIJING - China's property market might have outgrown its boom days, but predictions of an imminent property bubble burst and economic crash are premature.

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Public anxiety was ignited on Monday by media reports of real estate developers lowering prices in east China's Hangzhou and Changzhou cities and a commercial bank's decision to halt some property financing business.

Real estate-related shares plunged by over five percent on Monday, a predictable fear-driven overreaction to online and foreign media reports about the so-called crash of China's property market.

However, the moves by property developers and banks should not be over-interpreted.

Their decisions are rational precautionary reactions toward market changes and business operation problems and only indicate the real estate market differentiation in China's cities.

It is fair to say the property markets in some cities, especially third- and fourth-tier cities, are burdened with overcapacity and face mounting debt default risks. Proactive price and policy changes are actually good for their sustainable development.

But for megacities like Beijing and Shanghai, the property market will likely remain robust as real estate developers keep grabbing land at record high prices and people seeking better jobs and lives continue to pour in.