Friday, April 30, 2010

Some more China property news -- Speculation at a turning point?

I'm not talking about Greece for now as the situation is so fluid and even if they get IMF/Euroland funding it is going to still be a nasty long haul for the Greeks . . . . On to China.

A good article regarding property speculation occurring in the 'boonies' of China, not only the main cities. From Chovanec:
I’ve heard experts insist that it’s purely a top-tier phenomenon, but the evidence of my eyes and ears tells me that similar market dynamics have taking hold all across China . . .
Note several familiar trends I’ve been mentioning all along: people buying multiple apartments they have no intention of occupying; up-front cash purchases; funds channeled into real estate due to lack of investment alternatives; a property market that far outstrips the local economy in size and energy; reliance on construction as a job-generator; and buyer psychology approaching obsession.
The recent clampdown on property speculation appears to have already tamped down prices and reduced the enthusiasm of some buyers.  From Chinadaily:
As new policies released by the Chinese government are effectively cooling down the real estate market, a rush to return purchased properties are emerging in many major cities, mainly led by speculators, the National Business Daily reported on Thursday.
Finally something that is a bit more opaque but possibly as powerful.  The state's rhetoric against property hoarding and speculation by officials (corruption) appears to be heating up.  This is much harder to determine as I'm not an expert China watcher. As such I don't know how important this is but reading the tea leaves it may be part of a larger strategy. From BusinessInsider:

In the commentary, entitled “To Solve The Populace’s Housing Difficulties We Must Root Out Self-Enrichment By The Powerful”, the author attacks corruption as the root cause of the failure to provide enough affordable, subsidized housing. And without a massive increase in the supply of affordable, subsidized housing, the government will not succeed in cooling down housing-related tensions that now threaten social stability. . .
The central government has staked a huge amount of credibility on cooling the real estate market and resolving housing difficulties for the masses. Skeptics will rightly say that Beijing has tried this before, several times, and never successfully reined in the web of interests and corruption that distort China’s real estate market. This time I think will be different, as the central government likely believes that housing related issues are the biggest threat to social stability in China.
If China decides to institute an annual property tax, like we have in America, the rush to the exits will be massive.  Until then it will be hard to precisely determine if / when the top is in.

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