China's housing market not to crash: history revisited

Appreciation of the yuan has remained moderate since 2005, up by around 36 percent at the end of last year. China's prudent monetary policy has kept the risk at the lowest level.

In addition, Japan's annual economic growth averaged at around four percent from 1985 to 1991, much lower than the 7.7 percent in China.

Hong Kong-style bubble and bust 

China's housing market is also unlikely to follow the Hong Kong route, caused by almost insane speculative buying and the crushing effect of the Asian financial crisis.

In the years leading up to 1997 when the bubble burst, a large majority of homes were sold to speculators. About 55 percent of existing home purchases were speculative and for forward housing, the percentage was about 70 percent, according to research by Huang Xingwen,a veteran expert on the real estate sector at Beijing Normal University.

Although China's home market is also fraught with speculative buying, it's nothing like the situation in Hong Kong. There is no official statistic on the matter, but real estate insiders reckon the percentage to be far lower.

Wang Bao, a Beijing branch manager at agents HomeLink, estimated the percentage to be at about 20 to 30 percent, or perhaps even lower, the result of a government squeeze on speculation.

The burst of the bubble in Hong Kong coincided with the Asian financial crisis, which hammered the stock market and foreign exchange market, sending the housing market into a tailspin which was out of the control of the authorities. China's housing market is not faced with any such financial crisis, neither regional nor global, at least not in the near future.

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