Capital Intensive China

How property cooling mechanisms are working

  • Published 06 May 2010

A flurry of measures to subdue the property market have been announced. We profile three key ones – mortgage restrictions, land sales and taxes – that are showing varying degrees of effectiveness.

The past two months have seen a rapid fire succession of policies aimed at subduing China's red hot real estate market (see CC Apr 22 Capital Intensive). The measures appear to be working as transaction volumes have taken a nosedive across most large cities in China (see CC Apr 28 alert). Not all of the tightening measures are created equal, and we believe that some measures will be more effective than others at bringing China's real estate market back down to earth. We believe that mortgage policies will have the most visible impact for the time being, and as long as they persist, the market will stay subdued. Tax and land policy changes address longer-term problems in the real estate market, but will be much harder to implement.

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