3. IS CHINA'S HOUSING MARKET AT RISK OF BUBBLE?

The existence of a bubble in the Chinese housing market has been the subject of much debate, and we can examine its risk through the presence and size of factors in the bubble triangle.

• Money/Credit?

China's GDP per capita CAGR 2003-2020: 13% (Japan's GDP CAGR during the bubble economy: 11%), abundant capital is looking for investment, and a significant amount flowed into the housing market.

Source: Worldbank

Relatively relaxed lending policies. (Loan amount: 70%, Loan term: 30 years)

• Speculation?

Chinese investors are mostly retail rather than institutional, and retail investors usually generate more irrational behaviour, which can push speculative activities.

Source: fei123

People buy more houses than they need to live.

• Marketability?

The marketability of the housing market in China is driven by:

1. Demand

China's urbanisation process continues to advance, with an increasing urban population and rising demand for housing.

Source: statista

Speculation in the real estate market has created a great demand for housing.

2. Supply

The area of new housing construction in China keeps high.

Large number of secondary transactions due to speculation.

• Policy/technology?

Many policies are associated with the housing market in China, but so far, the housing bubble in China has not burst for the following reasons.

1. China's economy is still growing relatively quickly and is not in a situation where Florida's fundamentals are not keeping up with prices.

Data source: Worldbank, Macroview

2. China is good at implementing policies on a regional pilot basis, advancing gradually and trying to give the bubble a 'soft landing'.

The risk of China's property bubble bursting is high, and the three factors of the bubble triangle have been met, but the Chinese government still has the opportunity to defuse the bubble rather than burst it.