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China’s latest policy for deflating the property bubble is Build to Rent

Worried about rising property prices and the high levels of debt that developers now have, China's State Council is encouraging Build to Rent as a solution. It will offer tax breaks to developers that rent out some of the housing they planned on selling and will encourage/force financial institutions to “provide support for companies in the residential rental sectors.”

However, one major problem with the plan is the fact that rental yields in China are extremely low. In big cities, such as Beijing and Shanghai, yields are hovering at just 1.5%. Wages in China simply aren't high enough to keep up with the credit-fueled rise in asset prices, so developers can't earn a reasonable rate of return by renting out units. A tax break is unlikely to fix that.

Despite reforms in recent years, there's little question that Chinese real estate is in bubble territory. From June 2015 through to the end of last year, the 100 City Price Index published by SouFun Holdings Ltd. rose by 31% to nearly $202 sq ft. According to Bloomberg, that is 38% higher than the median price per square foot in the US, where per-capita income is more than 700% higher than in China.

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