The New CS Board

[jumanji0881]

China's housing market is set for a hard landing:
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Excerpts:
The numbers are grim: China's property bubble is heading for a spectacular burst, and its effect on the country's economy will be widespread.

Investors also remain buoyant on China's future. They appear to be buying the official line that the gigantic property price bubble is gradually and smoothly deflating, posing little risk to an engine that's so crucial to the future of global trade.

But the math tells a different story. The housing frenzy has driven prices so high, so fast, that a crash on the scale of the real estate collapse in Japan in the 1990s is a virtual certainty. And China's already exaggerated official growth rate could take a pounding, all the way to the zone of the unthinkable, into the low single-digits.

As Aliber puts it, "In China, the housing boom is a far bigger source of growth than is widely recognized, and it's totally unsustainable."

Aliber got his first clue that the craze spelled disaster from a former student living in Beijing. The young Chicago alumnus told Aliber that he'd just moved into an apartment building with several hundred units, and was the only one living there. Investors had bought all the other apartments that hadn't sold.

Later that year, Aliber visited the office of an upscale developer in Beijing, who was getting $600,000 for 1100 square foot units with bare walls. The folks doing the purchasing were earning between $20,000 and $30,000. Given those modest incomes, it was obvious that the buyers weren't purchasing an affordable new residence, but speculating in real estate, either to live there for awhile then flip the unit, or simply leave it vacant while seeking a buyer willing to hand them quick windfall.