Morgan Stanley expects property 'meltdown'

via Wikipedia China's developers and banks face a 'meltdown' as home prices and sales continue to drop, according to analysts of Stanley Morgan, here in Bloomberg.
Earlier this week Shenzhen-based property developer Vanke had to face angry customers, as the housing giant slashed prices of projects under construction, without compensating people who had already bought the same property. While the housing crisis in China seems not related to the worldwide housing crunch, it is for the first time the country faces a property downturn on a national scale.
The plunge comes at an awkward moment as also the Shanghai stock exchange reached a record low, by only just not falling through the 2,000 index threshold. Finding a good way to invest their money has become rather tough for the Chinese investors.
The housing crisis is caused by government measures to cool down the economy, writes Bloomberg:

Property demand in Chinese cities has dropped by as much as half since the government last year raised minimum down payment requirements and increased rates on some mortgages to cool home prices, according to CSC Securities HK Ltd. analyst Liu Bin.

While the government has very little instruments to influence the stock market, removing curtailing measures on mortgages would also be rather difficult, since they were actually meant to have this effect. Keeping the restrictions in place might also not make the Chinese society in the larger cities more harmonious, this other major ambition of the central government, causing a huge dilemma.

Update:  No solution here in the financial magazine Caijing, but it confirms that in Shanghai investments in real estate have dropped dramatically. People are now putting their money on the bank, that cannot be a long-term solution.

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