New Developments Threaten To Burst China’s Staggering Housing Bubble
…bubbles can last for a long time. Are there indications that this
market may have peaked? Two key economic developments point to rising
risks to this multi-year housing rally.
1. Real rates on deposits have turned positive in China recently,
which will reduce incentives to use property markets as a savings tool.
If rich savers make more on interest than they lose to inflation, they
are less inclined to look for alternatives to bank deposits.
2. The recent madness in China’s money markets and PBoC’s “delayed reaction” to tight monetary conditions (see discussion)
could potentially spill over into the broader credit markets, resulting
in increased lending rates and tighter credit conditions in general.
That’s not great news for property markets. (more)
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