China’s housing bubble could burst

The Chinese government announced that growth for last year (2011) has slowed down from previous years, even though comparatively it is still an impressive 9.2%.  The housing bubble in China has led to higher prices in a short period of time which many economists believe is unsustainable.  Growth in home prices is sustainable if the purchasers income rises along with it.  However in China, citizens who earn $20,000-30,000 a year are purchasing residence worth $600,000 based on speculation that the price of the residence will increase and they can flip it for a profit. A similar event happened in the U.S. housing market except the ratio between price and income was even smaller.    It should be noted that unlike the U.S. economy after the housing crash, China’s economy should still grow but at a slower rate such as 4-5%.

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