China faces social unrest from housing woes

China faces social unrest from housing woes
MaoNo / Pixabay
China faces social unrest from housing woes

A laborer works at a construction site for new houses in Huaxi, China. Analysts say falling prices in the housing market could lead to social unrest this year, although Beijing is unlikely to let such grumbling go too far.

HONG KONG (MarketWatch) — Irate Chinese homeowners are among the top policy concerns for Beijing this year, according to analysts who say weakening house prices are stoking serious tensions.

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Financial author and CSLA Singapore managing director Fraser Howie calls it the “real unknown” of 2012, as there’s no track record of how this newly emerged class of homeowners would react if the current softening in residential housing prices turns into a prolonged decline.

“It’s too difficult to analyze what’s going to happen,” he said, citing the difficulty in sourcing accurate statistics on the property market and the short history of property ownership in China.

For the most part, property owners have never had to deal with falling prices since the 1998 policy change that helped what’s now viewed as the launch of the modern era of private-home ownership in China.

City University of Hong Kong political scientist Joseph Cheng agrees, saying that “China’s middle class are not used to business cycles yet.”

He points to disgruntled home buyers in Shanghai who protested developers’ price-cuts of unsold stock in blocks where they’d recently purchased apartments as an example of the grievances now being expressed by the middle class.

China’s intervention in the property market may be going too far, as the home furnishing sector is now feeling the pinch.

Some buyers in other Chinese cities could take to the streets this year, adding to a darkening social mood that includes other protest movements involving land and labor rights.

“This is going to be a difficult year — because of the political development trend, you [can] certainly expect more unrest,” Cheng said.

Also among the government’s concerns, said Cheng, is the likelihood that falling home prices could negatively impact consumer confidence and derail attempts by the government to foster consumer consumption as a driver of the economy.

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