Editorials

End of housing bubble?

(China Daily)
Updated: 2010-03-31 07:51

Editor's note: The comparisons between Japan's housing bubble and the one looming in China?are worthless but of great use for Chinese policymakers.

The reported timetable for the end of China's soaring home prices has recently been getting more attention than it deserves. Still, the problems a recent online article highlights are worthy of serious consideration by policymakers.

By comparing the curve of Japan's home prices between 1985-1991 with China's property prices between 2005-2008, the article predicted that China's property prices will likely plunge next year.

The story was readily accepted by many Chinese readers increasingly desperate about the unstoppable force of home prices in their cities. Though Chinese authorities have vowed to clamp down on housing price hikes in urban areas, another surge in property prices in major cities is on the horizon.

However, as many experts quickly and rightly pointed out, the simplified comparison in the online article is worthless given the two countries' vast differences in stages of development, demographic and geographic features, urbanization ratio as well as other conditions or issues pertaining to each nation.

More ironically, instead of giving an accurate prediction, the article may actually postpone the inevitable correction of the overheated property market by saving a number of people from becoming the last straw.

But the comparison between Japan's housing bubble and the one looming in China is of great use for Chinese policymakers. They have ample reasons to be cautious against repeating the mistakes of the Japanese real estate bubble.

(China Daily 03/31/2010 page8)