#04 Strategic Daily: The Time Has Come For China's Property Market
China's property are held up by price floors, now the CCP must decide whether to remove them. Is this the bubble that is expected to burst?
Last one for the week, team. Pretty important one to keep tabs on.
Have a great weekend.
The Chinese government is currently facing a dilemma regarding real estate price floors. Price floors are government-imposed minimum prices for goods and services. In the context of real estate, price floors prevent developers from selling homes below a certain price.
The Chinese government has implemented price floors to prop up the real estate sector, which is a major driver of the Chinese economy. However, price floors are also preventing developers from selling homes, which is creating a liquidity crisis for the sector.
Why price floors are holding up real estate values
In July 2023, Reuters reported that Chinese real estate sales volume declined 30% year-over-year, and average sales prices declined 0.01%. In a free market, declining demand would drag down prices. However, this is not happening in Chinese real estate because of price floors.
The dilemma
Maintaining price floors is good for China if its only goal is to prop up real estate
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