Mar 14, 2014

In china:House prices fell, the poor the most hurt

High prices problem is a hot topic in the annual national "two sessions", many people are eager to house prices plummeted, some experts and scholars more think prices tumbled by thirty percent or more, to help people to buy a house. Property prices collapse has become not buyers want to hear "Gospel".

But, if house prices plunged, as many people wish that far from "good news", it is "bad news", the general public assets will be severely damaged, economy would hit, it was the most benefit from the real estate developers, his reasons are as follows.

The poor have the benefit to be hurt by them

First of all, house prices fell, the people's nightmare began. Every time the stock market crash, gold prices tumbling, poor people of the spring is coming? Promise is not obviously, the poor or the poor. Slump in housing prices and the stock market crash, gold prices tumbling, there is no benefit not only the poor, but also hurt.

On the surface, house prices fell, good for not buyers, but in fact, people still hasn't been to buy a house, is mainly due to the limited funding. For China and many countries, the real estate industry is a pillar industry, house prices fell sharply inevitably be followed by the economic downturn, people have all kinds of investments will also greatly damaged, so the money will only less. At the same time, even if house prices slashed thirty percent, still too expensive for most buyers not, does not necessarily have enough ability to buy a house, become the beneficiaries of property prices tumble.

Moreover, home prices also can bring serious problem of unemployment. Housing market has long been kidnapped economic growth and employment, housing crash will be extremely important, not only will impact about 70 industries, linked to the real estate industry layers will drag on the financial, food, transportation and retail industries, leading industry business is affected, and cause many industry layoffs. If house prices fall, therefore, is not to buy a house of people is not received its first to be hurt by them.

To the people, have to buy a house when house prices fell more injured. Many people have to buy a house, fate is tied with prices already, a lot of people buy a room to owe bank through the loan to the bank with debt, as well as business people don't have enough money with house mortgage loan to the bank, a lot of older people are more the house rent for retirement security, and so on, the house has become their main property, is to have an apartment property prices tumble.

In I live in Hong Kong in 1997, the outbreak of the Asian financial crisis, the housing prices tumbled more than forty percent, the people of Hong Kong property badly shrunk, has more than ten families also became a "negative equity" (the market value of the property is lower than the original building mortgage to buy property), and lead to bankruptcy, sorrowful, charcoal burning suicide by jumping off a building events without it, let a person very plaint, so-called home prices slogan call, once the crash comes, but missed the undoing, believe that people don't want to see this period of history repeat itself in the mainland.

Property prices collapse caused a serious crisis

Second, the law of the housing market is buyers' buy or not to buy up, widely held "rather buy a pledge, the" pledge to buy down, attitude, once falling house prices become a trend, house prices could continue to adjust down significantly, at twenty percent or twenty percent, as "brake" stop falling rapidly, this will undoubtedly cause panic, and lead to serious consequences.

When the global financial crisis broke out in 2008, is that American house prices fell more than thirty percent, causing domino effect caused the global financial tsunami; Then, euro members Greece home prices fell forty percent, set off the crisis. Home prices tend to be severely impact the economy and cause financial crisis, and property prices hike would not all lost, property prices dropped all lost, no countries believe that the government will see prices crash and indifferent, the Chinese government also is such.

Especially, the real estate industry is still is a pillar industry in the development of Chinese economy, in promoting the new urbanization, improve the supporting infrastructure, promote investment in fixed assets, increasing the local finance income and stimulating economic growth plays a central role. Housing crash will damage China's economic development structure, make the local government financial resources are stretched, easy to set off the local debt crisis is now crumbling.

Home prices developers the most benefit

Finally, although house prices tumbled, ordinary people, the government would hurt, but it can gain real estate developers. Buy a house and buy stocks sometimes are similar, everyone wants to "buy low/sell high", however, do the high level but are mostly real estate developers, ordinary people are often "buy high and sell low.

Good developers like retail merchant, the housing market, rising house prices, high prices to buy to sell floor to make money. Bad housing prices fall, buying land cost and building cost will drop, developers and can buy cheap, cheap to build, and then wait for selling when prices rose, its profit is not affected by how much. Often, developers are more willing to in the property market downturn, house prices fell, the chance to buy cheap land and used as reserves.

Home prices, therefore, even if developers selling profits, but also is just a "delayed" (Delay Gratification) process, sooner or later, developers will earn higher returns. So, even if the downfall of high property prices, also won't "down with" developers, there will be only a few small developers because of lack of cash flow problems, more than medium-sized developers often can still continues to make money.

House prices slow down ten percent was best

, of course, the author is not advocated prices should rise, endless but think the more the economy development, urbanization, the expanded, people life level, the higher regions, it is unavoidable that prices tend to be expensive. This New York, London, Hong Kong, and Beijing, Shanghai and guangzhou, same all, high property prices although there are disadvantages, popular discontent, but high prices have is the inevitable product of the development of urbanization, also is the inevitable outcome of the economic development, but also the region's dynamic performance. As Africa Ethiopia although house prices are very low, but not necessarily everyone is willing to buy a house in the past.

For the people, the most ideal situation is not a crash, but the average house prices across the country can slow down about ten percent, after don't rise and fall to run for a period of time, for the public income continues to increase, digestion and high property prices, to an affordable home. At the same time, the government to build more affordable housing, "double limit room", in order to solve the housing difficulties of low-income people. (the author Liang Haiming Hong Kong financial commentator and author of "China's new economic policy and we")

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