Comments on: House of cards: the Beijing property market http://www.china-briefing.com/news/2007/10/17/house-of-cards-the-beijing-property-market.html Sat, 30 Aug 2008 06:04:02 +0000 http://wordpress.org/?v=2.3.2 By: Chris Devonshire-Ellis http://www.china-briefing.com/news/2007/10/17/house-of-cards-the-beijing-property-market.html#comment-3862 Chris Devonshire-Ellis Thu, 18 Oct 2007 05:39:20 +0000 http://www.china-briefing.com/news/2007/10/17/house-of-cards-the-beijing-property-market.html#comment-3862 I would concur with this view. The luxury end will be OK, but the normal 2/3 bed apartments are way out of whack. What should be more of a concern is the extent that people have gone to to get on the bandwagon - borrowing to the max, then re-borrowing from banks on the strength of the property to play the stock market. With a property bubble very much in evidence and the stock markets trading at 50 times earnings the entire house of cards can shortly come crashing down, and it seems there is little the Government can do about it - the government structure and involvement in Chinese commerce is part of the problem. Negative equity anyone ? Not a phrase heard very often in China yet there is so much debt swilling around. I suspect a huge test in keeping people happy will arrive on the governments doorstep when banks start to foreclose or go bust. The second decade of this century is not going to be a happy one for China. Hu Jintao's "You've never had it so good" is going to look a little silly in 4 years, and betrays the lack of understanding at the top end of leadership about the severity of the financial problems that are looming. Me ? My mortage is fixed rate but still has 5 years left to go at Palm Springs. But I get calls every day from people wanting to act as my agent to sell the property. It's gone up in value three fold, but it's irrelevant, I still need somewhere to live. While my mortgage is managable I view it as a home not an investment, and it is a sign of mass naevity amongst the Chinese that they will gambe their house, put themselves massively in debt to play with Chinese shares. Securing your property ahead of other investments seems to have eluded the pysche of many Chinese, and they will unfortunately suffer for such reckless behaviour. I only know two things about economics, and it's always stood me in good stead: 1) Buy Low 2) Sell High China is the opposite way around and has gone Buy High. Time to get out of all obligations, pocket the cash, and live in cheaper rented accomodation if you ask me. This is not the appropriate time for high value commitments. I would concur with this view. The luxury end will be OK, but the normal 2/3 bed apartments are way out of whack. What should be more of a concern is the extent that people have gone to to get on the bandwagon - borrowing to the max, then re-borrowing from banks on the strength of the property to play the stock market. With a property bubble very much in evidence and the stock markets trading at 50 times earnings the entire house of cards can shortly come crashing down, and it seems there is little the Government can do about it - the government structure and involvement in Chinese commerce is part of the problem.

Negative equity anyone ? Not a phrase heard very often in China yet there is so much debt swilling around. I suspect a huge test in keeping people happy will arrive on the governments doorstep when banks start to foreclose or go bust. The second decade of this century is not going to be a happy one for China. Hu Jintao’s “You’ve never had it so good” is going to look a little silly in 4 years, and betrays the lack of understanding at the top end of leadership about the severity of the financial problems that are looming.

Me ? My mortage is fixed rate but still has 5 years left to go at Palm Springs. But I get calls every day from people wanting to act as my agent to sell the property. It’s gone up in value three fold, but it’s irrelevant, I still need somewhere to live. While my mortgage is managable I view it as a home not an investment, and it is a sign of mass naevity amongst the Chinese that they will gambe their house, put themselves massively in debt to play with Chinese shares. Securing your property ahead of other investments seems to have eluded the pysche of many Chinese, and they will unfortunately suffer for such reckless behaviour.

I only know two things about economics, and it’s always stood me in good stead:

1) Buy Low
2) Sell High

China is the opposite way around and has gone Buy High. Time to get out of all obligations, pocket the cash, and live in cheaper rented accomodation if you ask me. This is not the appropriate time for high value commitments.

]]>