China’s real estate bubble has lost its fizz in many cities, complicating the government’s effort to manage an economic slowdown here. The pain is obvious in Liu Shirong’s apartment development. Liu, a shy electrical engineer, doesn’t mind living in a complex where only 50 of 780 apartments are occupied and the swimming pool is eternally empty. “I have peace and quiet at night,” he said. But the vacant apartments are a nightmare for the mainly speculative investors who bought them a year ago. Banking experts and economists expect this to produce a surge in loan defaults for Chinese banks by next spring or summer that will erode the high profits banks have been earning in the last three years although few banks seem likely to fail. But the effects of the bust could extend far beyond banking, complicating economic policy-making. For that reason, the Chinese government has announced a series of measures to support real estate prices. The central bank told commercial banks to reduce mortgage rates and down payments for borrowers seeking their first mortgage. The finance ministry also reduced the stamp tax on real estate purchases, effective November 1, but only for first-time home buyers acquiring an apartment of less than 90 square meters, or 969 square feet. Real estate professionals and economists said the measures were too narrow to reverse growing gloom in China’s housing market. Prices have already fallen by up to a third in some neighborhoods here in Shenzhen in southeastern China, the city most affected by the real estate bust.A national index of real estate prices released by Beijing on Wednesday showed a decline of 0.1 per cent in September compared with August, the first such drop the government has acknowledged.
