Skip to content
Subscriber Only
Businessweek
The Year Ahead

China’s Housing Bubble Wobble

Regulators struggle to manage an uneven boom.
A man looks as residential buildings stand in the distance in the Jiading district of Shanghai on April 11.

A man looks as residential buildings stand in the distance in the Jiading district of Shanghai on April 11.

Photograph: Qilai Shen/Bloomberg

Earlier this year, Mr. and Mrs. Cai, a couple from Shanghai, decided to end their marriage. The rationale wasn’t irreconcilable differences or even mild disagreements; rather, it was a property market bubble in China’s financial hub. The pair, who operate a clothing shop, wanted to buy an apartment for 3.5 million yuan ($519,000), adding to a couple of places they already owned. But the local government had begun, among other bubble-fighting measures, to limit purchases by existing property holders. So, in February, the couple divorced. “Why would we worry about divorce? We’ve been married for so long,” says Mr. Cai. (He requested that the couple’s full names be withheld to avoid potential legal difficulties.) “If we don’t buy this apartment, we’ll miss the chance to get rich.”

In the first eight months of 2016, according to data compiled by Bloomberg, average prices for new homes rose 28 percent in Tier 1 cities, which encompass affluent metropolises like Shanghai, and 10 percent in smaller, Tier 2 cities. The boom traces to 2014, when the People’s Bank of China began easing lending requirements and cutting interest rates. The China Securities Regulatory Commission also lifted restrictions on bond and stock sales by developers, helping them raise money for new projects.