China's Housing Market: Is a Bubble About to Burst?

31 Pages Posted: 5 Jan 2013

See all articles by James R. Barth

James R. Barth

Auburn University; Milken Institute

Michael Lea

San Diego State University

Tong Li

Milken Institute

Date Written: December 18, 2012

Abstract

China has weathered the global financial turmoil in much better shape than most other countries, including the United States. However, there been concerns that banks loosened their lending standards too much as a result of a huge stimulus, among other factors. This led to excessive lending to individual home purchasers and rapidly rising housing prices that, in turn, may eventually lead to an increase in nonperforming loans at financial institutions should those prices collapse. The result, if corrective actions prove insufficient, could be a banking crisis that might require a government bailout.

The crucial issue, therefore, is whether there is a housing bubble in major cities throughout the country that is about to burst. China has certainly experienced extraordinary growth in the housing market during the past decade, which has been accompanied by substantial increases in residential property prices.

This report examines whether the decade of rapid growth in home prices in fact represents a housing bubble, and if so whether the authorities are able to achieve a "soft landing" in the housing market.

Keywords: China, housing market, asset bubble, home price, homeownership, real estate

JEL Classification: R21, R31, O53

Suggested Citation

Barth, James R. and Lea, Michael and Li, Tong, China's Housing Market: Is a Bubble About to Burst? (December 18, 2012). Available at SSRN: https://ssrn.com/abstract=2191087 or http://dx.doi.org/10.2139/ssrn.2191087

James R. Barth

Auburn University ( email )

415 West Magnolia Avenue
Auburn, AL 36849
United States
334-844-2469 (Phone)
334-844-4960 (Fax)

Milken Institute ( email )

1250 Fourth Street
Santa Monica, CA 90401
United States

Michael Lea

San Diego State University ( email )

San Diego, CA 92182-0763
United States

Tong Li (Contact Author)

Milken Institute ( email )

1250 Fourth Street
Santa Monica, CA 90401
United States
310-570-4655 (Phone)
310-570-4625 (Fax)

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