I pass by those local agent offices daily and it seems to me they all have a lot more pictures on the windows now. It used to cover up maybe 1/2 the window but now they're all completely covered up and some are supplementing an additional sign outside. I wonder what they'll look like when the panic selling takes hold.

It happens every year in most countries. People start to sell and buy houses/appartments in the Spring thru to Summer. The market then falls away in Autum and Winter as no one wants to buy a house in the clod and dark.

Its what we call seasonal trade!

Still seems pretty cloddy and dark to me.

government here is hitting the brakes on house prices. When people sense this they sell. I know a few rich local friends who have apartments in Lujiazui. Rather than rent them out they're now selling.

Also, as the world pulls out of recession, the central banks are competing with each other for the world's funds i.e. interest rates are on their way up, especially as the rate of inflation is now rapidly rising in most major economies. This makes mortgages less affordable. Ever wondered why the rate of inflation in PRC doesn't make as many headlines as house prices? It's because it's about 5%, which is bad news. If house prices overall rose 1.5% Jan year on year, and all people's savings are tied up in real estate, then with 5% overall inflation - that equals a loss. The govt here is trying to shepherd the funds into other areas.

At least certain complexes I do follow, for certain reasons, have shot up in recent weeks. This in central Puxi.

Many locals rushed & purchased house within 2009, as banks stopped issuing discounted loans within December - these were even below 4.2, around 4.3% (this average for 15 yrs loan).

This happens in US (and probably most countries) but I am not sure if it happens in China.

People look for new housing in spring, because the best time to move is summer, so the kids go to a new school at the beginning of a semester. Sellers know this so they put their units for sale during spring...both inventory and # of sales shoot up, this is called "spring bounce".

Chinese RE market is quite different. Most of the buyers are newly weds, and few would move in right away because most would do a remodeling first. So I am not sure about the reason of spring bounce here.

I looked at www.anjuke.com and some apsrtment prices are down a little more than 20%

I large % of appartments/flats/houses bought is Shanghai are paid for in CASH! Parents and Grand Parents save money when children are born and when they get married they pay for the Newly Weds home.

So a change in the interest rate is not going to have that great an impact here in China.

China is not in the same S-H-I-T as Europe or North America, it did not suffer the bank crash or a massive rise in unemployment. With an increase of GDP of at least 8% this year when the rest of the world is less then 1%, I do not see a crash in the housing market here in Shanghai.

i actually saw higher prices. in hongkou apartments are still cny3.8mio for a 100sq m place. doesnt seem to fall. prices are not even negotiable and most owners come with a 'we dont need the money' attitude.

i agree with mr happy. i dont see a crash coming.

main factors to consider:
1. are there alternative investment tools in china? at the moment no and also no easy way to invest overseas. thus most people just park their cash in properties.

2. land auction. govt keeps clearing land and auctioning them at record prices. so how can property price fall? also those who are cleared out are rewarded with 5-10 apartments. this new wealth is once again use to buy properties.

3. economy. no sign of a recession and thus most people dont want to take profit when they dont need the cash. call it illogical but most mainlanders think that way.

unless u see the 3 factors corrected, its v hard to see a crash

^

(1) Totally agree. The stock market is also dubbed China's casino by the locals.
(2) True, but a few people here and there getting rewarded for clearing out wont affect prices much.
(3) Dont agree with this. Inflation is rising here much faster than real estate. Ultimately the real estate investment is there to realise a return. If that return buys less than it did before the investment was made, then it's a loss. To control inflation, interest rates will go up. Cash is also an investment. If interest rates go up, then cash savings suddenly seem like a nicer and safer alternative and those who need mortgages suddenly find them unaffordable. BUT the problem with cash investments I suppose is that the central bank (i.e. govt) is entirely in charge of what return you get from it, whereas in real estate it's a little different I guess.

I have read some interesting articles recently.
A real estate investment in most parts of the world must either satisfy a human life need (basic housing) or as an investment, must provide a return (rent) in order to justify holding to the property, otherwise the cost of holding will incurr a loss.
But not in China until now, because there is no property tax, only a tax when you sell the property.
There is no incentive to sell unless it is to make a profit, not as an income stream.

The recent government measures don't change the situation much, because as long as people don't sell and because they hope to sell at higher price in future, landlords dont feel pressure to sell.
If now, some day, there is a property tax for holding property, then it could push a lot of people to sell all at same time...Secondary market is not great in China, outside of Shanghai and Beijing, nobody knows what would happen if millions of second-hand apartments were put for sale at same time.....
Last thing is the banks exposure, not for residential real estate, but for loans granted to SOEs based on collaterals estimated often in a distorted way : for example, a SOE with a factory land will use data of a luxury residential building few blocks away to ask for a loan . If for any reason , the company runs into trouble in its business, and the prices of residential property drop, then all the loans granted to SOES will turn out to be bad loans

Will see. Just guess if one day, interest rates in US go up significantly, it will be the beginning of the end for real estate in China... And since Chinese people have never seen a drop in prices, it is going to be......messy

It's overall product inflation that matters. e.g. If the price of pork goes up by more than real estate then the real estate investment is losing value and Shanghainese lose money because their home buys less hong shao rou than it did before. Right now inflation is 5% here. If real estate rises around 1.5% per year, but central bank interest rates are 3%, then do the math as to which provides a better return.

Shangstar wrote:It's overall product inflation that matters. e.g. If the price of pork goes up by more than real estate then the real estate investment is losing value and Shanghainese lose money because their home buys less hong shao rou than it did before. Right now inflation is 5% here. If real estate rises around 1.5% per year, but central bank interest rates are 3%, then do the math as to which provides a better return.

real estate rising 1.5%??? is this realistic?

secondly local bank rates are never in line with inflation. the general question is if food inflation rises what can u do? nothing. ur choice in china is either pathetic bank deposit instruments maybe get a little pickup becoz of some equity link structure OR u invest in property. given that most chinese have a one way view of chinese props, then they would naturally park their money in properties. its that simple. at the end of the day they really have no choice.

some food for thought

http://www.sohochina.com/en/news/detail ... 070&cid=12

What is your overall approach to the real estate market today?
Basically – other than Qianmen [Street] in Beijing, which is the only project we decided to hold long term, our strategy for today is to sell everything we have. The real estate business should really be looking at rental yield; build a building and then lease it out with the rent giving a decent return. But, because of where China is with asset bubbles, people want to buy the assets regardless of whether they can be leased out or not. People just want to hold [property], even if it is empty.

most prices that u see are not including tax. eg owner asks for cny3mio for a 100 sq m place. u would also need to pay the taxes and brokerage associated with it for the seller as well. thus there would be an additional 200-300k added on. thus the slow down in prices is really fake.

http://www.telegraph.co.uk/news/worldne ... opers.html

How much worse can it get I wonder?