Growth in China’s housing market is expected to slow this year even as it becomes more uneven across the country. This comes as the world’s second-largest economy is grappling with overly high housing prices in major cities festering resentment among people who can’t afford a home, as well as huge amounts of worrisome shadow-banking debt linked to questionable property deals and infrastructure.
In 2013, housing prices in major Chinese cities shot up quickly as homebuyers returned to the market after concluding the central government is unlikely to impose further property curbs that had a limited effect in reining in runaway housing prices. Housing sales in China rose 26.6% in 2013, accelerating from the 10.9% growth in 2012, but the consensus view is that pent-up demand for homes has been digested, and growth in housing sales would moderate this year.
Strong demand and a lack of new homes in downtown areas in major cities are pushing prices up, while sluggish demand and oversupply in smaller cities threatening to drive home prices and the local economy down.