China Property Woes: An un-American Response
June 5th, 2010
The apartment complex middle manager stood on the balcony of my former apartment and gestured at the apartments just in front of us. “Those sell for more than 10 million RMB each,” he said, his round face excited at the prospect that the neighborhood was on Suzhou’s high-value property map. The property he was talking about faced a medium-sized lake around which scores of other high rises had gone up. He pointed at the new construction just a few hundred meters from where we stood, where high rises in various stages of completion saw a hum of ant-like activity. The site had awoken me the last year every morning at 6am as heavy machinery prepared the site for the work of the day. “Those have all sold out, and were even more expensive.” Some of them did not even have lake views.
But the overwhelming majority of residential construction of the high-end luxury sort in China, it’s no wonder Li Daokui, a professor at Tsinghua University and a member of the Chinese central bank’s monetary policy committee, indicated in a video interview with the Financial Times recently that the Chinese property market was even more dangerously perched than the American market before the housing bubble State-side collapsed. His point was basically that while Americans were fulfilling the American “dream” of buying a home, Chinese believe home ownership a necessity. The rapid and artificially stimulated inflation of housing property values in China has left the overwhelming majority of Chinese without the wherewithal to address that necessity. If housing remains so stratospherically out of reach of average, hard-working Chinese who are trying to play by rules clearly bent to the advantage of those in power, Li’s point that such a blatant inequity could ignite social discontent on a massive scale.
Meanwhile, with an inevitable correction (of questionable level, admittedly) in the market, new-money homeowners could find their investments turned to plaster-dust.
With such a dire prognostication, it’s no wonder his video interview is banned in China.
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June 10th, 2010 at 8:01 am
http://online.wsj.com/article/SB10001424052748704025304575284442742333032.html
Evidently the government’s attempts to reign in the housing bubble are working. Its worth mentioning that unlike in the US, a rapidly growing urban population and rising wages in China does justify at least some of the increase in housing prices with real demand (the rest is because of speculation of course), which long term makes the markets much healthier than their american counterparts.
June 10th, 2010 at 8:04 am
Hi, Outcast;
Yes, I believe that is true too. There is genuine demand and a real need for housing here in China. Hopefully government policy will take enough of the speculative “hot air” out of the housing bubble buyers and economists can gain enough transparency that they can see the fundamentals driving the market.