Wednesday, July 7, 2010

These girls fall like dominoes

China's property market braced for 30pc drop

Standard Chartered has told clients to prepare for a fall in property prices of up to 30pc in Beijing, Shanghai, Shenzen, and other large cities in China as the delayed effects of monetary tightening begin to bite. Stephen Green, the bank's China economist, said a glut of newly built homes were hitting the market just as buyers are restrained by higher down-payments and curbs on speculation. "We believe developers will be forced to cut prices," he said. The government is trying to deflate the housing market gently, mostly using tools known as "financial repression" rather than Western style rate rises. China views soaring house prices as a threat to social stability, since workers are shut out of the market. The price-to-earnings ratio is 13 in Beijing and Shanghai.

Posted by drewster @ 01:27 AM (1470 views)
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5 thoughts on “These girls fall like dominoes

  • little professor says:

    30% is conservative. China has had a massive asset price bubble, that makes the UK look like a minor blip. Prices have doubled over the course of a year, with the average house price in Beijing being 80x average earnings.

    The vast majority of property purchases are being made by speculators, many of whom simply buy with cheap borrowed money and then don’t even bother to rent out the house, as the asset price inflation makes any potential rental income seem like peanuts.

    There are whole “ghost towns” where new housing developments have been bought up by speculators and then left completely empty – new developments are springing up to meet demands from ‘investors’, even though many of these developments are being built on inhospitable land which will never be suitable for human inhabitation, with no public infrastructure at all. This has all the hallmarks of a classic tulip mania-style bubble.

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  • China will fall apart. Hopefully the transition won’t be as violent as in the past. When a person has a taste of the good times they certainly don’t want to return to the past.

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  • LP “There are whole “ghost towns” where new housing developments have been bought up by speculators and then left completely empty…”
    Tell me about it – there are several within 10 miles of where I live!

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  • Rental John says:

    Investor funded ghost towns are not only a symptom of China’s growth, whereas this is (has) occurred around the world (Dubai for instance), but the Chinese are ill prepared for the consequences. Since coming in from the cold they have only known growth, and their herd instinct will trigger mass sell offs and total collapse of property investments. The biggest ponzi scheme imaginable will collapse!

    I was recently in northern Taiwan (‘like’ China – same investment culture, customs, and thought process prevail)…and there are many high rise apartment complexes, newly built, with nice gardens, gated entrances, and security – but look closely they are TOTALLY empty, not a curtain, most cases no furniture, no lights on, no cars, no kids playing, no people, NOTHING!…like a scene from some post-apocolypse B movie…..total madness. And if all the apartments did suddenly become fully occupied or tenanted (doubtful) the local infrastructure could not cope!

    Interesting article and website: http://www.creditwritedowns.com/2010/01/construction-in-chinas-ghost-towns.html

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  • montesquieu says:

    The number of people affected by this is relatively small compared to China’s wider population – I doubt whether there will be major political effects.

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