China Housing Market Crisis Given New Theory

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The concentration of China's property sector in the hands of the country's largest firms has caused the market's downfall, a new study found.

The concentrated nature of the real estate industry in China was a key factor triggering the ongoing property market crisis in the country, a new study by the University of Michigan has found.In 2018, a few years before the beginning of the market's downturn, the top five real estate developers in China accounted for 30 percent of the country's entire housing production—compared to a share of 13 percent in the U.S.

The ongoing crisis has exposed the faults in the housing production model in China, which since the early 2000s has favored a concentration of power within the hands of a few conglomerates while discouraging that of local industry, which remains largely decentralized.Large firms prevailed because they had the advantage of easy access to low-cost capital, an open land market system and the use of pre-sale business practices.

 

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