In China's Housing Sector, a Short Recovery Hides a Longer Slowdown

In recent weeks, China's housing sector started showing signs of recovery after more than a year of nationwide declines in home prices, home sales and real estate-related investment. The reversal comes after Beijing relaxed mortgage restrictions for second and third homes and enacted policies that include allowing local governments to swap outstanding loans for low-interest, slow-maturing local bonds. In the coming months, these measures will help stabilize real estate markets in major cities. The short-term gains in home prices and sales, however, should not be mistaken for a recovery of either the housing market or the national economy. Slow growth in the housing and construction sectors will continue for at least the next year, if not longer. The trend will affect employment in the regions dependent on these sectors and undermine China's economic and financial stability.