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[[File:China house price change.gif|thumb|In December 2017, the average price of new houses in China´s 70 cities rose by 5.3% y-o-y.

This was a sharp slowdown from December 2016´s 12.4% y-o-y price growth, based on figures from the National Bureau of Statistics of China. Clearly, tighter government measures in late 2016 have dampened the housing market.]]

The housing or property bubble is a situation in which prices in real estate hike as a result of excess demand over the supply of housing. This is a growing problem and China has had its own share which many scholars have seen as a growing problem instead of being an actual bubble. The country has seen a higher demand for accommodation between the periods which have been identified within this essay, being from 2012 to 2019. There have been several hikes in demand leading to a corresponding increase in the prices for these housing units within the real estate business. As discussed in this essay, whether there is a hosuing bubble or not is up for debate as many scholars believe the hike in prices is not a cause and an effect in itself but is due to a reaction in other social occurrences. As the country continues to develop and transform into a global super power economically, more citizens are moving from the rural areas and towards the urban centers as a way by which they can better their lives. As a result, there are more people placing demands for housing units and accommodations in these areas, leading to higher prices of these housing unit. These hikes continue to occur in the period and are indicative of excess demand over supply. The government can however correct this by opting for affordable hosuing for citizens based on their own incomes and preferences and with flexible payment plans that allow them to live comfortable lives, and that removes the high demand and a risk of a housing bubble as has been argued to have occurred over the period.

Background
The housing bubble is a concept that examines how the prices associated with accommodation and housing in real estate take a hike as a result of several economic factors. It is an occurrence that happens periodically and these bubbles over time end up bursting and have other economic effects on the country. It is a temporary event however, but has no specific period for which it could last. It is a hike in the demand for housing units as against the limited supply available within that period. We will examine the housing or property bubble within China and how it has occurred in various phases over the years from 2012 to 2019. The housing bubble has however been a case of controversial debate amongst scholars, as some of them argue that the signs which seem to suggest that there is a housing bubble issue may just be periodic hikes in accommodation prices influenced by some minor factors. Others also argue that there is a housing bubble due to these same factors and because of the long periods associated with the issue. This has been the case in China and this essay works out to explain from these view points whether there is the occurrence of a housing bubble in the Chinese real estate industry, or whether it is just a minor price hike.

Identification
China has a relatively fast growing economy and the country is considered as one of the stronger economic powers in the global economic landscape. Most Chinese citizens are moving towards the capital cities within their provinces to have a share or a taste of the growing economy than they would in their villages and small towns and as a result there is an increased presence of Chinese folks migrating within the country. The identification of this problem where there is a hike in the prices of accommodation facilities stems from the demands that are placed on real estate in these cities as a result. There are more people in need of places to stay and space to conduct their businesses. As economic principles dictate, the higher the demand for a commodity, there is an increase in price due to scarcity. Identifying that there is an increase in the demand for the accommodation facilities, apartments and office buildings, work spaces, amongst others, is the first step to knowing when a housing bubble is beginning to develop within the society. The activities of China in relation to real estate however seem to suggest that a housing bubble exists, despite the critics and scholars who do not agree with this theory of its existence within the Chinese economy. The prices of housing and homes are however at levels that seem to suggest otherwise. The prices in real estate have increased at a rate beyond the rate of increase in real salaries and household incomes within the Chinese economy. The identifying factor is this increase because of the amount of bank loans that have been disbursed over the period. In order to make an argument clear that there is the existence of a housing bubble in China, we are able to identify it by the rate at which real estate prices increase as compared to the rate at which real incomes increase, as well as the rate of bank loans that citizens are going in for as a way of salvaging their economic wellbeing and living in comfort. There are more people being unable to match up their living expenses as against the types of lives that they need to lead in order to consider themselves to be comfortable. Several loans are therefore taken because o their inability to both afford for housing facilities and also take care of other important needs and wants as may be the case. The high amounts of bank loans taken out is also an indicator or identifier. However, whether or not a bubble is existent is another case in dispute. The risk of a developing bubble is however true.

Causes
There are some causes of housing or property bubbles and some of them have occurred in China as well. Property bubbles occur when there is a high demand for housing as against the small number of housing units available to real estate developers to give out. Per economic principles, when there is an increase in demand as against a relatively lower supply, prices are due to increase. This is one of the major causes of the housing and property bubbles, especially in China, especially as a result of the growing population and the increase in demand for housing in the urban areas of the country. This is however a reason given by some scholars as to why the current situation over the years in China is not real, and is a genuine economic issue. They argue that the increase in the prices for housing are just a reaction to other factors such as the large numbers of people demanding from housing within a specific period in time, and not a bubble where the hike in the prices of housing are of themselves increasing to suit the real estate targets. They are periodic factors having short periodic effects on the market. Property bubbles also occur in the event of anticipation by investors and stakeholders that prices of property and real estate will increase in time and therefore rush into the real estate market and place demands which escalate the prices of homes. In this example, it can be explained that some members of the housing industry may have foresight or anticipate that more people may be interested in purchasing houses, buildings and apartments, amongst others, and that this may lead to an increase in the prices and they may therefore decide to delve into the housing market to make purchases of housing ahead of this time. This in itself creates a sudden boost in the demand for housing and will lead to increased prices. This anticipation by stakeholders and players within the industry of future price increases in itself causes these increases and has an effect on the market. They may therefore purchase these housing units at high pries, in anticipation of a time where they may resell at even higher prices due to the excessive demand.

Extent
The period in question, being 2012 to 2019 has seen major increases in the levels at which the prices of real estate have gone up than any other era. There have been major increases yearly on the demand for housing in the urban areas especially, as more and more citizens from the rural areas troop in to establish themselves in these central zones. There have therefore been high prices due to demand, and these prices for housing have continued to increase in the period. The housing or property bubble has been building up since then and the question is more about when these hikes are actually regarded as being a bubble than just an increase in price due to the rate at which demand exceeds supply within the period

Side effects
The side effects of this housing or property bubble is that, as expected, there are major increases in the prices for which housing and real estate properties go for, and trying to ensure that housing prices are reduced is only working towards increasing pressure on the demand for housing and properties in the smaller regions and communities within the country. These are all side effects of trying to prevent the increase in the effects and the level at which price levels in property and real estate continue to hike. The attempts thus to reduce housing prices is only creating a higher demand because more takeholders as well will aim at making housing purchases now where they may get lower prices. This is however not happening because demand only continues to increase, and there is hardly a chance of any reduction.

Housing market correction
There are some policies which could help towards correcting the housing situation in China as the price hike continues. The prices which have to be paid on mortgage and other charges on homes are being subsidized in other to alter the real estate situation in the country. There are also affordable housing and settlements being put up in order to ensure that the demand for homes decreases and thus reduces the prices that they go for. Affordable housing is one that is very necessary to ensure that the housing bubble is deflated in the existence of one, and prevented in the event of a build up towards one as most scholars have come to believe. Some countries have opted for affordable housing units to match up with the financial strengths of their citizens in order to reduce the costs associated with the purchasing of housing and how this affects the people in the country. This is a very good way by which the housing market correction can be undertaken because, unlike other real estate facilities or housing units, these houses, buildings and various units of accommodation belong to the government and the government is more inclined towards reaching the needs of people, and will therefore make available these units at cheaper prices. These affordable units will also be built in several groups in order to help all citizens work towards comfortably purchasing the kinds of housing that they can afford, instead of the largely luxurious apartments and other housing types which the real estate industry may offer to all classes of individuals for them to compete for. Those who can therefore go for one-bedroom apartments can do so and those who seek to get housing for their large amily sizes can also be granted these privileges. The income size and family sizes will help determine the types of housing the government may provide for these different groups of citizens, and there will also be payment plans that are flexible and convenient for these people to make the payments easier for all. The bubble is one which has existed for a very long time and with time it is evident that the country’s authorities, being the government, have to make several decisions and ensure there are policies which help to prevent this bubble.

Subprime mortgage industry collapse
The subprime mortgage industry collapse occurred in the year 2006 when banks sold mortgages at an alarming rate and it led to a financial recession and at the drop of prices in 2006, there were several defaults which occurred and thus led to losses to the various institutions which had shares.