Last week when I called my parents who live in China, we talked about the recent price decline in the Chinese real estate market. My dad told me that it seemed like people weren’t concerned about property values ​​in my hometown, which is a small border town. We both wonder why.

I have read a lot about China’s real estate market since its government released its new policy with restrictions on property purchases and loan applications in October 2011. I felt that the Chinese government finally realized that it needed to squeeze some bubbles out of its market. real estate before it is too late. (or it was already too late). Since then, a drop in property prices in large cities has been observed in China. In Beijing, a price drop of RMB 6,000 per m2 became very common. In Shanghai, property liquidated in December 2011 has hit a record low.

Property developers had to reduce the price of the property voluntarily or involuntarily after the announcement of the new policy. To attract new property buyers, they offered discounts or expensive freebies to new property buyers, in addition to offering a relatively low price. However, the discounts and low price could not convince most property buyers. They were holding their money to wait for another price drop, which explained why the liquidated property had hit an all-time low.

Chinese property investors believe that there are still bubbles in China’s real estate market and that the property price needs to be reduced by another 40 to 60 percent to reach its fair value. Homebuyers who can afford a property want to wait because they don’t want to see an equity loss on their new home even before the deal. So he only leaves them one option which is to wait and see. Real estate developers are eager to find out when investors and homebuyers will start buying again. But do they have an answer?

I believe that the development of China’s economy in 2012 is key in its real estate market. This year will be very hard for the country and it could be a key year in the modern history of the country. If China goes into recession or even an economic collapse in 2012 as some economists predicted. We can almost say that what will happen in China is a high rate of inflation and a fluctuation in its currency. People will start to lose their jobs and find property too expensive to afford. A bad economic climate will definitely cause a collapse of the real estate market in China. If China’s economy can make its way through 2012, there is a chance that the real estate market will pick up again in 2013.

The reason property owners in my hometown weren’t as concerned about their property values ​​was that they thought only big cities had real estate bubbles, but not a small town. They forgot the fact that both big cities and small towns are part of China. A major collapse of the housing market across the country will likely affect the local housing market.