Property bubble will not wreck China's economy

Bailout unnecessary

Anticipation has been building recently for some kind of action to bail out the property sector. However, economists said it was not necessary.

"Developers had been building too much. Why not let them take the responsibility. Only after going through bubble-bursting can they learn to be more cautious. And the process of unleashing the risks is also good for the health of China's economy," Wang said.

He likened the property sector to a sick man who has to go through pain before recovering. "In this process, you don't have to take any protective measures to artificially end the disease."

Declining home prices in some cities might also be helpful to rein in speculation in the property market.

"The divergence of home price moves will be a good thing as that is how a mature market functions, and it will force buyers to be more rational and market-minded," Jia Kang said.

It is still too early to say how this divergence would evolve in the future, but the price fluctuations conform to the rule of market, so there is no need for the government to overreact, Jia added.

To get China's real estate sector back on a healthy track, Jia suggested the authorities first increase supply of low-income housing and accelerate property tax legislation.

The making and enforcement of the property tax law, which is being piloted in Shanghai and Chongqing, is widely believed to be helpful to rein in housing market speculations.

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