Wednesday, September 29, 2010

China Restricts Land Banking by Developers to Reduce Speculation

In an effort to curtail land speculation and the bubble which many (like me) see forming, China is restricting many types of land banking and other real estate development.

There are loopholes to the new rules, mostly if developers use their land and assets to build low and moderate income housing.

In other words, speculate on the low end of the market and not on the high end.

I am curious if limits on land banking really put a brake on the capitalist fever which has been sweeping the real estate market in China.  My intuition says no even though there is no real agreement on whether there is a bubble in China at all.

Read this article from Forbes on why the Chinese real estate "bubble" is not a bubble.

But, if there is no real estate bubble in China, why is the government taking steps to cool what is a rapidly growing sector?