Skip to comments.China's Real Estate Bubble May Have Just Popped
Posted on 12/19/2011 9:40:29 AM PST by cowtowney
The craze for vacant real estate is due in large part to a lack of attractive alternatives. Strict controls on capital outflows prevent most Chinese citizens from investing any real money abroad. Chinese bank deposits earn very low interest rates -- lower, for the past year now, than the rate of consumer inflation. The public sees the country's domestic stock exchanges, which have endured volatile ups and downs over the last few years, as little more than high-risk casinos. In contrast, real estate, which has not seen a sustained downturn since China first converted to private homeownership in the 1990s, has long looked like a sure bet.
(Excerpt) Read more at foreignaffairs.com ...
“Beijings response to the global financial crisis added jet fuel to the fire. To maintain GDP growth of nearly ten percent during a massive downturn in global demand, Chinas leaders engineered a lending boom that expanded the countrys money supply by roughly two-thirds. Real estate was already the preferred place for the Chinese to stash cash; now, investors had that much more cash to stash. Prices rose accordingly: In many locations, the cost of prime new properties doubled in just two years.”
And here I was all ready to go to Disneyland.
With “One child per family” and zero immigration, You might think somebody could foresee that all these investment homes may wind up setting empty for longer than previously expected. Real estate booms have always been fueled by growing demand which normally had a growing population to back them up.
“Real estate booms have always been fueled by growing demand...”
No, actually demand had nothing to do with it. China needed a certain GDP growth (10%) and so they made it by building stuff where there was no demand.
Well, I believe they have a billion or so citizens (”serfs”) who have not yet joined the run on real estate. So population growth is unlikely to be a factor with such a large pool “in reserve.”
Then again, most of those probably will never be in a position to join the relatively small elite of real estate owners. There is no Chinese “middle class.” Just a thin crust of “haves” and an overwhelming majority of “have-nots and never-will-haves.”
We need to send Clinton, Rubin and Bawney Fwank over there to straighten this out.
The Chi-coms need to order banks and property owners to make loans to people with no money so they can move those properties. Everybody can get rich!