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Can the rental market deflate China's housing bubble?

New policies should reduce imperative of homeownership

| China
Apartment blocks in Beijing   © Reuters

Chinese home prices have climbed so much and so fast that cities like Beijing and Shanghai now rank among the world's least affordable property markets. The high cost of living has reduced the competitiveness of local economies by making it difficult for young skilled professionals to take up new positions. Many observers are concerned about the possibility of price bubbles.

After several years of trying to restrain property price growth through local controls on who can purchase homes and how many they can buy, the Chinese government is increasingly seeing the development of the rental market as an alternative route to more affordable urban housing and a way to support the deleveraging of the economy. While recently announced measures should help stimulate the rental market, more will need to be done to affect the underlying dynamics of property buying in the country. A real price correction however could be more than the authorities want to bargain for.

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