Calculated Risk

As long as the Chinese government taps the brakes on the housing market whenever necessary, a steep drop in home prices is unlikely. This assumes the government learned from its mistakes in late 2007, when it adjusted too hard. Given the sentiment and concern out of Beijing about keeping a balanced economy as the world recovers, strong movements to dampen the Chinese housing market are unlikely. It is more likely that the government will continue to use the banks, as well as rules on second mortgages, to cool specific locations through 2010 while letting the overall market grow.