Thursday, Mar 11, 2010
Chinese consider investment property "a store of value" - sound familiar?
FT: Debunking the myth of a collapse in China's [property] markets
Media reports of Chinese "ghost cities" are cited as evidence of excess. However, there are crucial differences between China's property markets and those of the US or Dubai. Chinese household debt is just 17pc of GDP, compared with roughly 96pc in the US and 62pc in the eurozone. Home buyers in China are required to make minimum downpayments of 30pc before receiving a mortgage, and at least 40pc for a second home. The crux of the problem with the Chinese real estate sector is that property is seen by the country's investing class as a store of value, within an economy that offers its citizens limited investment options. Investment interest in residential property has caused over-development of higher-end apartment buildings and under-development of mass-market affordable housing.
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