Wednesday, May 10, 2006

China Crisis

If you want to find an example of a rapidly growing and potentially overheating property market there is nowhere on the planet at the moment quite like China. The extraordinary economic growth that China has experienced is translating into a demand for more housing and rapidly escalating house prices (up 17.3% in Beijing in just two months earlier this year)

Construction companies are having a field day according to the People's DailyChina is building more houses every year than the whole of the developed world”. But the Ministry of Construction is getting worried. Does China really need all these new homes? It’s outdated statistic compiling systems don’t really give the answers. It appears to have reached the conclusion that just because it is profitable to build houses it doesn’t follow that they are really needed. So how do you measure need? The Ministry of Construction has reached an interesting conclusion – it’s empty homes. “It has issued an instruction to authorities in 40 major cities to conduct a thorough survey of empty homes before policymakers take any further measures.” The thinking presumably is that if there are lots of empty homes people could live in them rather than building lots of new homes. A conclusion we don’t yet seem to have reached in the UK.

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