China risked $1.3 trillion loss to intervene in rising housing prices

China's real estate market has quickly rebounded after the crisis caused by the coronavirus, and the overheated market has triggered concerns over financial risks. That's why authorities have stepped up restrictions on the industry to rein in rising housing prices.

According to the announcements, central land sales were suspended in cities such as Qingdao, Tianjin, Shenzhen and Huizhou.

Finally, Chinese regulators, which stopped private equity funds from raising money to invest in real estate, also suspended central land sales.

“The government is closing gaps in the land market, just as it does with house-buying rules,” Yan Yuejin, research director of the Shanghai-based E-house China Research and Development Institute, told Bloomberg.

THEY HAVE EARNED 1.3 TRILLION

Last year, local governments generated more than $1.3 trillion from land sales. This move will mean that China will have to give up serious income to fight high housing prices.

The real estate sector, which made up 5% of the economy in 1995, has now reached 13% in the economy. For this reason, the Chinese government, which is trying to cool real estate prices, needs to be very careful.

“The goal of government policy is to stabilize land and housing prices rather than allow market participants to make additional profits,” said Stella Guo, an analyst at Nomura Holdings.

“WE WILL AVOID USING THE REAL ESTATE SECTOR TO REVIEW THE ECONOMY”

Chinese Vice Premier Han Zheng also said that the government will avoid using the real estate sector as a short-term tool to stimulate the economy.

In order to prevent rising housing prices, China announced at the beginning of July that governors would be held responsible for housing sales in cities with rapid housing price increases.

Meanwhile, the measures taken by China to prevent the rise in housing prices began to take effect.

House prices in major cities rose to the lowest in six months in July, according to data released by the National Bureau of Statistics on Monday. Housing sales increased by 0.3 percent in July compared to the previous month.