China to Ease Home Lending...

[GZBILL]

As far as Guangzhou and Shenzen is concerned, i would not touch that market. True prices have dropped quite a bit. So has demand. It may turn out to be the rust belt of China in a structual adjustment. No one knows how the structual adjustment will happen, but garment factors, toys, shoes and other labor intensive industries are dying for sure. China is no longer competitive in these areas.

I would pay closer attention to Shanghai and buy here. Prices need to drop 20% more. We are following a few developments and watching the price.

In a recovery Shanghai will pick up first. The demand is here, supply quite limited. I would be careful about Beijing. The price, as well as supply went out of line in anticipation of the Games and it is feeling the reality.

 

While the Shenzhen market sucks, Guangzhou is doing quite well and prices are pretty much holding -- for now -- much better than Shanghai and Beijing. Much better.

 

While one problem in Beijing was the artificially inflated prices due to the Olympics, that was only in an isolated area of Beijing. The more dominant issue was a) the useable land area in Beijing is much less than in other even smaller cities and B) the sizeable executive expat community (especially Chaoyang District).

 

Prices in Chaoyang are falling because of new construction coming online and the sharp decrease in the expat community.

 

Shanghai's real estate market has been overheated for a long time and prices are dropping. Even rent prices are dropping. This is not in relation to a pent up demand holding back for more government intervention because any intervention will touch only on those properties 70 m2 or smaller and that is not a significant factor in Shanghai prices.

 

At one time Shanghai was the place to be for multinational companies and expat staff. Well, there has been a significant cull. Occupancy rates in Shanghai are second only to Shenzhen -- they truly suck. The expat population willing to pay 20k RMB per month for a 3-bedroom apartment has disappeared and in its place are returning overseas Chinese who are getting paid 10% of what expats earned and looking for places to rent that reflect that.

 

I don't think the timing is right to buy any real estate at all unless it will be your principal place of abode and has some special advantages that make it practical such as close to kids schooling or convenient to public transportation.

[rogerluli]

Our contacts on Hainan say that prices have not dropped at all but sales are very slow...