While U.S. homeowners are lamenting the continuing depression in real estate prices and slack sales in cities across the nation despite record-low mortgage rates, home prices in China are at record highs in all 70 cities monitored by Beijing despite higher mortgage rates and property taxes imposed by authorities.
Bloomberg reports the government has been trying to tamp down China’s exuberant property market, calling on local governments to add restrictions on home purchases. But local governments are reluctant to do so since property sales are a significant revenue source for them. Cheng Siwei, the head of Beijing’s International Finance Forum quoted in London’s Telegraph, says China’s credit-fueled property market is “our version of subprime in the U.S.”
Speaking at the World Economic Forum in the Chinese city of Dalian, The Telegraph quotes Cheng saying, “the tightening policy is creating a lot of difficulties for local governments trying to repay debt, and is causing defaults.”