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  1. #1
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    Default ‘Sizzling’ Shanghai Homes Defy Tax, Bubble Concerns

    ‘Sizzling’ Shanghai Homes Defy Tax, Bubble Concerns (Update1)



    By Bloomberg News




    Dec. 18 (Bloomberg) -- Gloria Gu paid $483,000 for an apartment near Shanghai’s financial district so her 3-year-old son could attend one of the city’s best kindergartens. Six months later, a similar place in her building sold for $615,000.
    “Prices are way past reasonable,” said Gu, 31, a food company manager who bought her three-bedroom, 140-square-meter (1,507-square-foot) apartment in the Pudong area in May. “The market is too good to be true.”
    Escalating prices in Pudong, transformed within two decades from vegetable fields to skyscrapers for Citigroup Inc. and HSBC Holdings Plc, underscore a Chinese property market that set record highs this year after the government unleashed $1.3 trillion in new bank lending to counter the global recession.
    Premier Wen Jiabao said Nov. 28 that property speculation must be suppressed, and the government on Dec. 9 reinstated a sales tax on homes sold within five years of purchase after reducing the period to two years in January. That change is superficial and will have minimal impact, said Lu Qiling, an analyst at Shanghai Uwin Real Estate Information Services Co.
    “It’s only a token measure,” Lu said. “It won’t change the upward trend in housing prices.”
    Government ‘Dilemma’
    China’s leaders won’t make major policy changes because they are preoccupied with economic growth and social stability, overriding concerns that rising property prices are forming a bubble, said Clement Luk, an analyst at Centaline Property Agency Ltd. in Shanghai.
    “The government is clearly in a dilemma,” Luk said. “It wants to address the surging property prices and concerns on bubble-bursting, yet it dares not take drastic measures for fear of hitting the market too hard.”
    The nation’s real estate and stock markets are a “bubble” that will burst when inflation accelerates in 2011, former Morgan Stanley chief Asian economist Andy Xie said in an interview in Hong Kong today.
    “China’s asset markets are a Ponzi scheme,” said Xie, now a Shanghai-based independent economist. “Property is heading for one huge bust that will take a year and a half to unfold.”
    Home prices in 70 major Chinese cities, including Shanghai, rose 5.7 percent from a year earlier in November, the fastest pace in 16 months, according to government data. The property market was a prime driver of the economy’s 8.9 percent growth in the third quarter.
    Japan Scenario
    “Rapid” increases will continue through the first half of 2010, said Zhou Hu, a real estate analyst at Bohai Securities Co. in Beijing. Prices will rise for the next three decades and peak in 2040 at 2.5 times current levels, according to China International Capital Corp. estimates.
    China risks a “similar asset bubble” to that in 1980s Japan unless lending is reined in, Erwin Sanft, head of China and Hong Kong equities research at BNP Paribas, said Nov. 23.
    The Nikkei 225 Stock Average surged sixfold and commercial property prices in metropolitan Tokyo rose fourfold before the bubble burst in 1990, triggering what Japanese call the “lost decade” of little or no growth. The Nikkei trades at a quarter of its December 1989 peak.
    “Over liquidity will lead to asset bubbles in equities, real estate and commodities,” China central bank adviser Fan Gang said Nov. 18. “That’s something we really need to watch.”
    Disney, World Expo
    China Vanke Co., the country’s largest publicly traded developer, said this month that sales in the first 11 months rose 36 percent to 57.9 billion yuan. Thirty-three of 35 analysts have a “buy” rating on the Shenzhen-based company’s stock.
    The Shanghai Property Index, which tracks 33 developers listed in the city, has more than doubled this year, compared with a 75 percent gain for China’s benchmark Shanghai Composite Index. Today, developers fell, led by Vanke, on concern the government will step up measures to curb property speculation.
    Vanke plunged 5.4 percent to 10.66 yuan at the midday break, after China raised the required down payment on land to 50 percent. Poly Real Estate Group Co., the nation’s second- largest developer, tumbled 4.9 percent to 22.50 yuan, a ninth day of losses. The Shanghai property index slumped 4.2 percent, the most since Nov. 27.
    Pudong, covering 1,210 square kilometers (467 square miles) from the East China Sea to the Huangpu river, is home to China’s largest stock exchange and its biggest futures exchange by value.
    China said in March it aimed to make Shanghai a world financial center by 2020 by allowing more foreign participation in its capital markets. Walt Disney Co. will build its first mainland theme park in Pudong, and Shanghai is spending $4.4 billion on subways, roads and other infrastructure before next year’s World Expo there.
    ‘Sizzling’ Market
    Average new apartment prices in Pudong gained 57 percent this year to a record $4,061 per square meter, while overall prices for China’s richest city rose 26 percent to a record $2,434, according to Shanghai Uwin, which tracks prices.
    Accountant Wang Jin waited in a downpour for six hours last month to buy into a Pudong apartment project by Shui On Land Ltd., a Hong Kong-traded developer controlled by billionaire Vincent Lo.
    More than 800 people lined up outside a sports stadium to buy about 220 units costing about $4,100 per square meter on average.
    Mortgages Surge
    “I couldn’t believe what I saw when I got there,” Wang, 37, said. “I know the property market is sizzling now, but this?”
    New home mortgages in the first nine months of this year totaled about $139.5 billion, quadruple the amount offered a year earlier, the central bank said.
    Cao Guanzhou, a real estate agent in Shanghai, tried to take advantage of the boom. After selling his Pudong apartment in May for 54 percent more than what he paid three years ago, Cao closed his hot pot restaurant and started selling properties.
    Business is slow, he said.
    “Too many agencies have opened up,” Cao, 51, said. “There’s too much competition now.”

    http://www.bloomberg.com/apps/news?p...d=aqiNuxetDZbg
    "There's one way to find out if a man is honest-ask him. If he says 'yes,' you know he is a crook." Groucho Marx

  2. #2
    Join Date
    Dec 2007
    Posts
    887

    Default

    My gosh, the article is quoting in US dollars isn't it!

    This is going to make Auckland's apartment bust look small when it finally bursts.

  3. #3

    Default Sizziling Shanghai

    Wow they are forecasting rising prices until 2040, seems a real long cycle, most housing cycles usually dont last longer than 16 years not 30!

  4. #4
    Join Date
    Feb 2010
    Location
    Bangkok, Thailand
    Posts
    24

    Default

    Good news, isn't it? I guess the real estate industry is now recovering form the downfall. Specially in Bangkok, more and more are demanding for office spaces, meaning, the economy is going its way up again. Nice photo.


 

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