Raise the interest rates to break the bubble of real estate?

Raise the interest rates to break the bubble of real estate?
Jul 18, 2007 02:45
KEVIN0518 Points: Join Date: Mar 13, 2007 Status: offline	Why is the house price in China rising so high? One of the reason is that some people buy the house and 'save' the house. When the price rises, they sell it at higher price to make profits. At present, about 80% people invest in real estate to make profits. China real estate has become a large bubble. When will it break? Let's wait and see. Yi Xianrong, a scholar in China Academy of Social Science said that the government should set a new policy to raise interest rates. Only in this way the bubble can break. What do you think of his advice? Is it helpful? If not, do you have any idea on this issue?

Jul 18, 2007 02:45

KEVIN0518
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Join Date: Mar 13, 2007
Status: offline

Why is the house price in China rising so high? One of the reason is that some people buy the house and 'save' the house. When the price rises, they sell it at higher price to make profits. At present, about 80% people invest in real estate to make profits. China real estate has become a large bubble. When will it break? Let's wait and see.

Yi Xianrong, a scholar in China Academy of Social Science said that the government should set a new policy to raise interest rates. Only in this way the bubble can break.

What do you think of his advice? Is it helpful? If not, do you have any idea on this issue?

Jul 19, 2007 01:04	#1
JOHNNY512 Points: Join Date: Nov 29, 2004 Status: Offline	Well, I see that the purpose of raising the interest rates is to make more people deposit their money at banks so that less people will invest in real estate. But I think it will not work well since China real estate has been hot for a long time and it is easy to make money from it.

Jul 19, 2007 01:53

ZOEY
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Join Date: Nov 29, 2004
Status: Offline

Well, Johnny512, do you mean that raising interst rates is to make more people deposit money so that the real estate developers will not have enough money to invest in constructing new buildings. I think you are probably unclear that the fund invested in real estate mainly comes from the bank loans rather than ordinary people's direct investment. Therefore, the major purpose of raising purpose of raising interest rates is to restrict bank loans to the developers.

I agree with you on this point that this measure may not be effective enough, since the bubble has been floating for quite a long time. It is a hard-nut.

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