[IMF China mission chief Nigel] Chalk argues that China faces a potent cocktail of ingredients pushing house prices up:
- High domestic savings, and limited opportunities to take cash offshore
- Limited domestic savings options and bank deposit rates below the rate of inflation
- No property tax or capital gains tax, which makes it cheap to buy and hold property
- Rapid growth, high wages and urbanization, which mean real demand continues to grow
The government’s crackdown on high housing prices has had some success. But Chalk believes that the restrictions on speculators introduced so far treat the symptoms, not the causes, of the malaise.