Author: Alex2010

China's Real Estate Bubble Threatens to Burst [Copy link] 中文

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Post time 2010-8-3 18:53:11 |Display all floors

Alex
interesting article, thanks for sharing

but dont be too evil

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Post time 2010-8-4 16:36:15 |Display all floors
But making such unfounded allegations of an invisible bubble growing up in China - there can only be one conclusion:


Wrong. The bubble is NOT invisible, even the government is warning about it and wants to burst it in a controlled and healthy manner. And seeing economic problems in a country does not mean that you hate this country. I've also warned about the bubble in the USA and took good care that all my investments were shifted away before it burst. So if you believe there is no bubble, go ahead and buy an appartment now - but I and also most Chinese buyers (as statistics show) believe in a bubble and refrain from buying an appartment in China now.

For me, it's quite easy to figure out that there is a bubble:
1. real estate prices have been growing faster than the GDP for years
2. most people can't afford an appartment, only wealthy investors can
3. risks are not contained in the interest rate - the very same mistake that was already made by the USA before their real estate bubble. Interest rates are just too low in China.

So somebody has to pay for this situation: either the poor who can't afford the house or the investors who spend too much on a house and may lose their money or the banks who give out loans which threaten to turn bad while only asking for very low interest rates - or the government that has to pay money to build cheap appartments and can't afford developing land anymore due to the new regulations.

The government saw this problem - some people here don't wana see it. I advise you: better wake up and  the apartments you don't need right now - in one year, you'll get substatially less.

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Post time 2010-8-5 21:46:14 |Display all floors
english chat super group:46343144.welcome to join!

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Post time 2010-8-6 11:09:05 |Display all floors
Originally posted by Everynowhere at 2010-8-4 16:36


Wrong. The bubble is NOT invisible, even the government is warning about it and wants to burst it in a controlled and healthy manner. And seeing economic problems in a country does not mean tha ...


Yes there is a bubble, but the bubble will not hurt the economy because half of the real estate is paid in savings so you won't see a USA or Japan style CRASH that brings down the banks

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Post time 2010-8-9 22:21:55 |Display all floors
Sounds great! Plenty, of cheap flats to put your mistresses in?

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Post time 2010-8-10 16:07:32 |Display all floors
Yes there is a bubble, but the bubble will not hurt the economy because half of the real estate is paid in savings so you won't see a USA or Japan style CRASH that brings down the banks


I agree on that; the banks belong to the government, so they won't be destroyed when their debitors can't pay back. But this means, the problem is just shifted, not solved:
1. the debitors will be in deep depts (and probably even without home, although I hope & assume that the government will show some mercy to them and don't kick them out their homes). That means, they don't consume - and therefore, not only the investments, but also the consumptions break down - which will be a very difficult situation for the economy and for the individuals.
2. the banks will be still in debts - debts which are not covered. So their private creditors won't give them money... so the government has to give them. Thus, the government will be in deeper debts.
3. if the central bank doesn't want interest rates to rise and keep the economy alive, they'll have to flush it with liquid money. Even more than the amount already given last and this year...

Anyway, the nearly 3 Trillion Dollars China saved will enable the country to find cheap credits abroad and keep up the stability. So I don't think China is going to collapse or something, but it won't be easy.

I could go on building this possible scenario, but the accuracy isn't given anymore as at this point, the development largely depends on the government.

What I'd suggest to Chinese investors: invest a substential part in gold (kinda risky, as the world is recovering from a crisis, which might lead to a decrease in gold prices) or, if you can, in a foreign currency. China came out as the first one of the crisis, while Europe is right about to come out of it's own crisis - that's why I see huge gain potential for the Euro towards the Yuan (and most other currencies). When investing in China, take risk - invest into export business to profit from the fact that world is lacking behind China in recovering and in order to put urself in a good situation if there are turmoils in chinese markets.

These tipps represent my own oppinion and I do not guarantee for them.

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