Chinese property bubble

The 2005 Chinese property bubble was a real estate bubble in residential and commercial real estate in China. The New York Times reported that the bubble started to deflate in 2011, while observing increased complaints that members of the middle-class were unable to afford homes in large cities.Zero Hedge noted the bubble started to deflate in late 2013 when housing prices began to fall, and the deflation of the property bubble is seen as one of the primary causes for China's declining economic growth in 2013.

The phenomenon had seen average housing prices in the country triple from 2005 to 2009, possibly driven by both government policies and Chinese cultural attitudes. High price-to-income and price-to-rent ratios for property and the high number of unoccupied residential and commercial units have been cited as evidence of a bubble. Later, average housing prices in the country increased between from 2010 to 2013,

Critics of the bubble theory point to China's relatively conservative mortgage lending standards and trends of increasing urbanization and rising incomes as proof that property prices are justified.

There have been many factors that may have led to rising housing prices. Possible contributors include low interest rates and increased bank lending, beginning in 2003 under Wen Jiabao which allowed cheap credit for the construction and purchase of property while making competing debt investments less appealing. During the bubble, local government relied on land sales for income (accounting for up to 50% of revenue), incentivizing the continued sale and development of land. Limited access to foreign investments for Chinese citizens increased the appeal of domestic investments such as property. Chinese citizens also faced cultural pressures encouraging home ownership, particularly for men seeking a wife.

Responding to the 2007–2012 global financial crisis, the spending from the China economic stimulus program may have found its way into real estate, contributing to the bubble.

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