Photo: After all the talk of ”Bubble Trouble” and predictions the sun going down in China, the Chinese real estate market is now booming.

China’s real estate markets, after eight months of a government-induced slowdown, are back on the boom trail. In early 2005, banking regulators hit the brakes on the redhot market because skyrocketing prices reduced the affordability of new homes to families with medium incomes and because new non-performing loans began to pile up in the banking system. Profit taxes and strict regulations limiting the supply of available land were supposed to eliminate speculation. The government’s measures had an almost immediate effect. In the 17-million-metropolis Shanghai, which accounts for less than two percent of China’s population but 20 percent of all mortgage loans in the country, prices tumbled by 15–25 percent. Some luxury condominiums experienced even higher losses. Thousands of realtors went out of business. Vacancies shot up. Reports about Shanghai’s ”Bubble Trouble” started to circulate.

Strong gains in prices
Recently the markets in Shanghai and other large cities of China have gained strength again. So much so, that the People’s Bank of China in late April raised interest rates for the first time since 2004. The National Statistics Bureau revealed with its latest numbers that the real estate climate index, which went down to a reading of 102 in April 2005, climbed back to 123 in March this year. Five of the largest cities – among them Beijing, Shanghai and Guangzhou – reported strong gains in prices.