Lost in all the news about Goldman Sachs and their new legal troubles tied to excesses in the U.S. housing market a few years back is news that the Chinese government seems intent on “pricking” their current housing bubble as reported in China Daily (a predicament that U.S. politicians and Wall Street types would, today, happily trade for their own).
The second blow that the central government dealt to the red-hot property market has come much sooner than expected. Just two days after it decided to lift down payments and second-home loan rates, the State Council announced on Saturday that commercial banks can refuse to issue loans to third-home buyers in cities where housing prices are rising too quickly.
Such continuous, heavy moves are meant to drive home the message that the government is very serious about reining in runaway property price hikes.
The latest efforts to cool the property market shows the authorities have fully recognized both the danger of a looming property bubble and, more importantly, the huge cost of not pricking it in time. But more efforts are needed to keep various speculators at bay, to ensure the sector’s healthy development.
Wow! What a sharp contrast to the U.S. government’s words and deeds regarding our monstrous housing and credit market bubble just a few years ago.
Of course, the decisions in China are being made with the knowledge that bubbles can be spotted in real time and that “pricking” them might not be such a bad thing to do given what’s happened to the global economy over the last few years – the exact opposite of the lesson that was learned when the U.S. stock market bubble popped in 2000.