Friday, Aug 06, 2010
How to spot a bubble
An American Perspective from China (blog): China’s Real Estate Riddle
There’s an old story reported by an American journalist in Shanghai after the end of World War II. Ravaged by hyperinflation, locals had turned to using tins of sardines as an alternative currency. One recent arrival opened his “proceeds” from a sale only to find the sardines inside were spoiled. He complained to the other trader, who cried, “You opened them? My God, man! Those sardines aren’t for eating, they’re for buying and selling.” Apartments in China aren’t for living in, they’re for investing. That is the real source of demand.
Posted by drewster @ 01:08 AM (848 views) Add Comment
7 Comments
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1. d'oh said...
Interesting article, which chimes with much that has been said in the forums concerning Chinese property.
I suspect one day they will lose some faith, and there will be hell to pay.
2. Pwez said...
Indeed. Apparently the Chinese invest in apartments as an alternative to gold. They have no need to occupy or gain an rental income (and its impossible to do so) because there is no tax to pay on property. Unless an alternative investment vehicle comes along (or they lose faith in property ) the bubble is likely to persist
3. tenyearstogetmymoneyback said...
Several years ago I saw a program in which the only person actually living on a large Chinese estate
explained that the Chinese regard second hand houses in the same way as we regard second hand
cars i.e. as soon as it has been used it looses about 20% of its value.
4. Rental John said...
Cracking article.....
91+587 'million m2' in empty floor space (WOW!) - that is more than 1/3 London 'surface' area. {1 000 000 m2 = 1 Km2, and London metropolitan area is @ 1,700 km2}.
I miss simon68.......perhaps he is on holiday, or busy trying to flog his investments {or too busy posting on other blogs}?
5. the number cruncher said...
I was heard a story (told to me by a well respected Land Value Tax advocate) about how Chinese Communist Party members had bought land and built houses (that remain unoccupied) beside proposed train stations sites of new railway lines. Even though the stations are not due to be built for another 10 to 20 years.
6. str 2007 said...
The product of a bubble is greed followed by fear. Is it right in this day and age that we should be able to steal another families labour by way of removing a property from the Market and renting it back to them ?
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