China's expanding real estate market: are the current growth rates healthy?

Abstract

China's economic growth rates since reforms were introduced in 1979 have been impressive. In the past six years, for example, China's annual average growth rate was 9%. In the real estate sector, investment revenues increased by an average of 27% in each year. However, a recent People's Bank of China report suggests that real estate investment might be a risky business. This paper provides an analysis of the problems in China's real estate market, which include the overheated nature of current market, unsustainable development in land and other non-renewable resources, an impoverished housing security system, and a\ud misreading of the high level of financial risk in real estate development. Against these generic concerns, the paper offers some basic strategies for sustainable real estate development, which include minimizing GDP-based measures to evaluate real estate projects, using social benefit-cost analysis models for the evaluation of real estate investment projects, improving the housing security system, making bank lending more rational, and paying more attention to financial risk

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