Quote from S2007S:
All who have a positive view on shanghai and growth there will totally ignore any real news about the bubble growing ever so steadily. Everyone always says its different this time, just like it was here in the US in just the last few years. I know China has different ways than the US when it comes to purchasing real estate but a bubble is a bubble is a bubble.
Everyone here disagreeing about the asset bubbles going on in china especially in the shanghai real estate market, well if everyone here is so ignorant and totally clueless, why is china chasing the bubble now to the point to curb any further growth in this area. They know its out of control, you can read the stories from individuals who are rushing into the market to buy real estate because all they see is prices moving higher month over month, quarter over quarter. You also see people who have purchased real estate that are seeing their purchases up just weeks after buying.
They pumped $586 Billion into their economy to stir up demand just last year. They also did it to stop the global crisis from taking down their economy. In the mean time all it did was create more liquidity pushing commodity prices higher and creating asset bubbles so big they now have to step in to slow these bubble concerns down. Remember the great bubble in Japan in the late 80's, they are still feeling that asset price bubble from 2 decades ago.
* JANUARY 21, 2010
China Seeks to Tame Boom, Stirs Growth Fears
By ANDREW BATSON
BEIJINGâChina's resurgent housing market has underpinned its world-leading economic recovery over the past year. Now the real-estate boom could be turning into one of the biggest risks to the nation's continued growth.
China's economy likely expanded around 8.5% in all of 2009, easily surpassing the 8% target the government had set early last year, when some economists were warning that growth might only reach 5% or so. The government publishes official data for the fourth quarter and full year of 2009 early Thursday in Beijing.
That strong growth brings China closer to overtaking Japan as the world's second-largest economy, though final numbers from that country won't be out until next month. Like Japan did in earlier decades, China has grown by rapid industrialization, shifting its rural population into cities where they get better jobs and buy homes and consumer goods.
But as China booms, the similarities to Japan may be too close for comfort: There's increasing concern China could be headed for some of the same pitfalls Japan encountered leading up to the early 1990s, when the bursting of a massive real-estate bubble curtailed growth for years. Wang Shi, the head of China's biggest property developer, China Vanke Co., said in an interview last month that his country is at risk of a Japan-style property bubble if rapid price gains spread beyond major cities.
The latest evidence of Beijing's concern over possible bubbles came Wednesday, as the government placed further controls on the state bank lending that helped fuel the boom. Regulators said they would step up loan oversight and tightened lending controls on several banks, including Bank of China Ltd. The moves spooked investors in China, sending share prices down.
The fate of China's housing market is increasingly central to its economic fortunes. As the government gradually withdraws its stimulus programs, private businesses need to spend more if growth is to stay robust. According to the World Bank, the construction boom has been the main driver of private-sector investment in the past year. Other businesses remain reluctant to expand given weakness in the global economy and excess capacity in domestic industries.
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"With exports facing hard times, real estate has become an important pillar of China's economic growth," said Ji Zhu, professor of economics at Beijing Technological and Business University. "No one wants to see housing prices fall," he arguedânot investors, not property developers, and certainly not government officials.
Prices of new residential property are now rising at an annualized rate of more than 20% nationwide. High-end apartments in big cities have gained much more. So far, higher prices have encouraged developers to build more housing, boosting demand for construction workers and raw materials and supporting the overall economy. Both November and December saw a record volume of construction starts, which are up 75% from a year earlier for the quarter.
Koyo Ozeki, the Tokyo-based head of Asian credit research for bond-fund manager Pacific Investment Management Co., argues that comparisons of China's real-estate boom with Japan's speculative bubble are overdone, in part because Japan's economy was much more mature in the 1980s than China's is today.
China is still far behind developed-world living standards, and with its cities expanding and incomes rising, Mr. Ozeki argues, there will be plenty of genuine demand for new housing for years to come.
But that doesn't mean that speculation isn't also a factor in the housing market, especially with wealthy Chinese investing much of their savings in property. "You do have a secular trend of increasing demand over time, but on the other hand you could still get a bubble," said Wang Tao, China economist for UBS. "On the ground, there is a certainly a bubbly feeling: People are waiting to buy luxury apartments like they are waiting in line for cabbage."
The risk is that too much new housing is being built at prices too high to ever find buyers, resulting in wasted investments and bad debts that would weaken the economy in later years. Even without a crash, a housing market that serves only a narrow slice of the urban elite could turn into a political problem for the rulers in Beijing.
The less affluent, like Huang Haiying , a 28-year-old who works for a hospital in Chengdu, have been watching the steady upward march of housing prices with dismay. She'd like to buy an apartment downtown near her work, since the traffic is so bad further out from the center, but can't make the math work.
Prices in the center city have already surged well past $1,170 per square meter, or about $110 per square footâand at that rate, mortgage payments on a small apartment would eat up well over half of her monthly salary. "Some of my friends and former classmates have bought houses here, but I am still watching," Ms. Huang said. "The price now is just too high, and it's hard for me to make a decision."
Housing prices in Beijing and Shanghai are now largely out of reach for middle and low-income families. China International Capital Corp., a Beijing investment bank, estimates that 20% of the urban population that can still afford homes. That's a sizable market-some 120 million peopleâbut there are worries the rest are getting left behind.
"If the market is only focused on this small group of people, it can't go far, because they are after all limited relative to China's population of 1.3 billion people," said Wang Lina, a scholar at the Chinese Academy of Social Sciences. Two-thirds of Chinese households surveyed recently by the central bank say housing prices are too high.
Those concerns have been dramatized by a hit TV series last year called "Woju," or "A Snail's House," a Chinese expression meaning humble abode. The tale focuses on the difficulties a young couple faces in buying their own home in a big city modeled on Shanghai. One character becomes a government official's mistress to help her sister afford the downpayment on a new apartment.
Some young couples can afford housing only with the support of their extended families. Wang Bin, a 27-year-old employee of a telecommunications company in Beijing, paid 980,000 yuan (about $144,000) in August for a two-bedroom, 97-square-meter (1,040-square-foot) apartment. But he was able to afford even that modest dwelling only because his parents and those of his fiancée paid the 30% downpayment.
"It seems that prices are still going up, so I better buy now. Otherwise I might not be able to afford a house in the future," Mr. Wang said. Even with the financial strain on the family, buying a house now is still a better deal than continuing to rent, he thinks. The market value of his new apartment has risen another 20% since he signed the contract.
The government has started to respond to public concerns over high housing prices, issuing a series of measures in recent weeks aimed at restricting speculative purchases. China's governing State Council acknowledged this month that price rises in some cities "have drawn great concern."
But officials are still smarting from their attempt to deflate what looked like a property bubble in late 2007 and early 2008. Its efforts then caused Chinese households to lose confidence in the market, sending sales and construction into free fall even before the worst of the global financial crisis hit.
This time, the government is treading more carefully. Its main strategy is not to crack down on the market, but to increase the supply of cheaper and subsidized housing. But developers have little incentive to build less-profitable units for low-income households. An investigation by China's legislature last year found that only 24% of public-housing investments had been completed by August.
