China economy is going to continue to crash if property price goes up again, and there's no property tax. The current price-to-income ratio is 20-30.
China seems to reverse their stance on making property price to fall, they want the price to stabilize and rise in the long term. But I think this is going to be a toxic medicine.
This is because with a falling property market, people generally felt "poorer" and cut their spending and economy becomes bad in general. Thus China wants to stimulate economy by making people feel "wealthy" again.
The problem is, even after this devastating property price drop, the property average price-to-income ratio in China is still 20-30, even in poorer cities. In simpler words, citizens need 20-30 years of salary to purchase a home. To compare, US has an average ratio of 4 and New York is 10, most European countries is 5-10 as well.
So bumping the property market isn't a healthy solution in the long-run, teaching Chinese citizens to long-term invest in stocks will be, if the main goal is to make citizens feel "wealthy" and spending more.
In addition, China doesn't have a property tax like United States, so China cannot charge properties at a 1-2% yearly tax on their net worth. So even if property prices go up, it won't really benefit the government much, nor citizens (Because most people own and live in 1 home).
I understand the difficulty faced by the Chinese government, because there are too many stakeholders on high property prices, it's impossible to just make property price fall to a 5-10 price-to-income ratio in short term. However, this will be at the expense of everybody, including homeowners.
Let me know your thoughts, or correct me if I'm wrong.
Submitted October 15, 2024 at 12:36AM by Key_Type_4102 https://ift.tt/iYcVtdx
