Will China's Housing Prices Collapse?

There have been speculations that China’s property market is set for a hard landing, and in fact experts are amazed that the market hasn’t already crashed (http://www.forbes.com/sites/kenrapoza/2012/03/19/china-housing-prices-are-not-collapsing/). But looking deeper into what drives this market, it seems highly unlikely that China’s property prices could fall.

Consider both the short term and long term scenario of China’s housing environment. In the short term, expect some fall in housing prices following strict government regulations. However, difficulties in implementing standards hinders dramatic drop in prices. Take property tax for example, the diversity of the types of property in the Chinese market presents difficulties in implementing a fair tax law. Looking more long term, the government will eventually relax their hold on prices. Investors aware of this are less likely to sell at this stage and instead bet on the near future. Investor confidence is also fueled by China’s increasing urbanization. As a result, demand will remain higher than supply. As long as this does not change, it is unlikely to see massive drops in housing prices.

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