Things don’t look good for the Chinese real estate market. It seems the bubble is finally about to burst.
The signs are there: two months ago, developers in Shanghai cut luxury condo prices up to one-third of the original prices. This caused uproar amongst those who had recently purchased, many of them demanding refunds. Even investors reacted strongly; some destroyed showrooms and windows. And that’s just in Shanghai.
Across China, price reductions have been recurrent. Beijing saw a 35% price decrease on new homes in November. It’s believed that almost two years worth of properties in Beijing and Shanghai remain unsold. According to reports by Chinese radio, one-half of real estate agents in the city of Shenzhen have closed.
According to Patrick Chovanec, author of an article on the topic in Foreign Affairs, “Given the prices prevailing earlier this spring, the average wage earner in Beijing would have had to work 36 years to pay for an average home, compared to 18 years in Singapore, 12 in New York, and five in Frankfurt. The bidding war has further pushed developers to build ever more costly luxury properties that investors crave but few ordinary people can afford.”
The results of this bubble bursting will affect many across various industries. Chovanec continues, “In a few cities, such as coastal Wenzhou and coal-rich Ordos, the collapse in property prices has sparked a full-blown credit crisis, with reports of ruined businessmen leaping off building rooftops; some are fleeing the country.”
SOURCE: foreignaffairs.com China’s Real Estate Bubble May Have Just Popped
News
December 19, 2011Brad Pitt’s $12 Million Dollar Malibu Mansion Sold to Ellen
