The Chinese government’s monetary tightening should put an end to the real estate bubble, says Andy Xie, Morgan Stanley’s chief economist.

Xie, now an independent economist, told Bloomberg: “It’s very difficult to see this demand continuing.”

In recent weeks China has lifted short term interest rates and increased banks’ reserve requirements.

The government also re-imposed a sales tax on homes sold within five years of their purchase.

That will slow bank lending, he says.

“We’re seeing some significant measures that have been introduced in the last couple of weeks,” said Xie, who correctly predicted in April 2007 that Chinese stocks would drop.

“If these changes are implemented, the demand from third-flat buyers is going to dry up, and it’s going to have a major impact.”

Many speculators bought properties that haven’t been filled, and rental income is low, Xie says.

“Developers paying record prices for land might get trapped this year.”

BNP Paribas wrote in a new report that the monetary tightening could cause property sales volume to drop 10 percent, Bloomberg reports.

Previously the bank had anticipated a rise of 5 percent.

Many agree with Xie that China is in the midst of a real estate bubble that will soon burst.

Legendary short seller James Chanos wrote in a recent report that China’s real estate market resembles “Dubai times 1,000 — or worse.”