China's housing bubble may be ready to pop if the government doesn't take measures to prevent it, some economists are saying. The impact on China's economy could be devastating and permanent, much like Japan's crash of the 1980s, analysts speaking to CNNMoney warn. Home prices have spiked as much as 8 percent or more in some parts of the country over the past year. The National Bureau of Statistics found that of 70 major Chinese cities, 67 saw a rise in prices in April.
As seen in the Newsy video above, CNNMoney reports that a 2,000-square-foot, three-bedroom home fetches as much as $2.27 million in Shanghai, as property values have soared there and in other tier-one cities such as Beijing and Guangzhou in the past decade. The trouble is that China measures GDP by what is built, unlike the U.S., which measures growth by what's bought and sold. This has put pressure on the state to build as much as it can and has resulted in what have been dubbed "ghost cities" -- multiple-block stretches of vacant skyscrapers. That's a clear warning sign for a country that builds an average of 12 to 24 new cities a year, a financial analyst in Hong Kong, Gillem Tulloch, told "60 Minutes."
One idea is for the government to introduce an annual property tax based on a home's market value. "That would reduce speculation, discourage owners from holding empty flats and provide a fresh source of funding for cash-strapped local governments," The Economist suggested (via Business Insider).
The Chinese government has stated that it will implement a plan to curb the spike in prices in Shanghai and Guangzhou, but hasn't said when.
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