Courtesy of a long Zero Hedge post, a seemingly credible article was referred to about Chinese residential real estate markets, the mindset of buyers/investors there, and the like, in China's Real Estate Riddle. It's not long and worth a read in its entirety. Here are the opening two paragraphs:
"The end is near!” That was the message top government expert Cao Jianhai delivered in April when he predicted that residential property prices in China will plunge by half in the next two years. He reasons that China’s recent run-up in housing—average prices have tripled over the past five years—is unsustainable given the huge volume of new apartments sitting empty throughout the country.
Mr. Cao’s forecast is pretty scary, and not just for homeowners. China’s banks may not have invested in risky mortgage securities like CDOs, but they make most of their business loans based on collateral in companies’ real estate assets, which frequently are pegged to the going price of nearby residential developments. If that collateral were suddenly cut in half, China could face a banking meltdown that makes the West’s financial crisis look like a walk in the park.
Given the L. A. Times article of several months ago detailing immense overbuilding in commercial real estate in Beijing, and suspicions that China has been speculating in the commodities markets, a coherent narrative has emerged that describes a major bubble in China.
Add bursting of a possible Chinese bubble or twin bubbles to the list of possible bits of bad things that could happen to roil either markets and/or real economies in future months.
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