![China’s domestic housing sector was entering bubble territory last summer. (Getty)](https://s13.therealdeal.com/trd/nat/up/2021/01/beijing-bubbles-705x439.jpg)
The Chinese government’s recent efforts to temper unsustainable growth in the country’s housing market seem to be working, at least for now.
The price of new homes in the country’s largest cities was up 3.7 percent year-over-year in December, the slowest rate of growth since 2016, according to the Financial Times.
China’s domestic housing sector was entering bubble territory as of last summer. Buyers were more heavily leveraged than ever, homes were flying off the shelves, and investors had put $1.5 trillion into the market between June 2019 and 2020.
That growth was slowed only temporarily by the coronavirus pandemic, and by the end of the year, the government stepped in.
“The government doesn’t want property prices to keep rising and rising,” said a researcher at a government-run think tank, who called that “politically not acceptable.”
In August, the government adopted tighter lending requirements for developers, including a 70 percent ceiling on liabilities to assets and a 100 percent cap of debt to equity. Developers also had to have enough cash on hand to meet their short-term obligations in full.
Still, it’s unclear how effectively the market can be kept under control.
Orient Capital Research’s Andrew Collier said the government is better at controlling credit today than 5 or 10 years ago, but that banks and non-traditional lenders had ways to “game the system.”
The government has since targeted lenders, limiting loans to developers and allowing mortgages to make up only 32.5 percent of a bank’s outstanding credit.
[Financial Times] — Dennis Lynch
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