An oversupply of homes in China’s second and third tier cities could hurt its local economy by one percentage point, the International Monetary Fund (IMF) said in a Forbes.com report.
With real estate accounting for 15 percent of China’s gross domestic product (GDP), IMF noted that the market’s price correction and slowed construction hint at a hampered growth down by one percent from 7.5 to 6.5 percent.
IMF said that oversupply is currently affecting China’s industrial northeast as well as coastal cities in the north. The same is true for its commercial real estate segment.
Housing starts have dipped by as much as 12 percent while home sales declined by 10 percent, the report revealed.
“Previous downturns, such as 2008 and 2012, were driven by policies to cool the market, but this current one has come without a direct tightening of real estate policies and appears driven by overcapacity and concerns about future capital gains on behalf of investors,” the report said.
“As a result, many Chinese home buyers are turning to overseas markets, making oversupply a greater issue than before,” it added.
However, the IMF’s baseline scenario revealed that China’s housing market would eventually recover in 2016.
Earlier in May, the Financial Times noted that “it’s time for the world to pay attention” as China’s real estate bubble is likely to burst this year. It blames the country’s failure to act on a sound stimulus package as a major cause of a possible property bubble burst.
“The default risks in the weakly regulated shadow banking sector—and the rapid rise in local government debt— are real, and property-related. Yet the government and the central bank have tools to limit the short-term consequences; they have already deployed debt rollovers, bank bailouts and recapitalizations,” the report noted.
The report added that while property prices in 70 cities in China were up by eight percent in March than the previous year, they represented a steady decline since the end of March 2013.
As Chinese property investors look for more attractive investments in the west, one technology that U.S. real estate agents can use to tap this market is RealBiz Media Group, Inc.’s (OTCQB: RBIZ) Nestbuilder.com.
RealBiz Media’s Nestbuilder.com aims to grant agents control over how they want to run marketing campaigns for their listings. The portal came at a time when the norm among agents for capturing leads is to buy them from established multiple listing sites.
“Nestbuilder.com’s mission is to both empower the real estate agent and to connect the homeowner and homebuyer directly with the agent in a personalized and meaningful relationship without interference from large, impersonal, third party lead generation sites,” RealBiz Media President and chief revenue officer Steve Marques noted.
“Homebuyers are able to create personalized video collections of potential homes to be set-up for review and sharing. Agents can quickly bring their listings to life via RealBiz’s rich video conversion tools, and market their properties directly to homeowners and homebuyers in a personalized, customized, entertaining, and engaging format no matter where they are," he said.