Chinese Real Estate

The FT quotes a leading Chinese economist (Cao Jianhai, professor at the Chinese Academy of Social Sciences) as arguing that Chinese urban residential property prices will decline 40-50 % over the next two years. That's right: 40-50 %!

Some other choice tidbits from the interview:

"... preliminary government investigations had turned up numerous examples of real estate developers using fake mortgages to offload apartments on to the books of state-run banks facing enormous pressure from Beijing to rapidly increase lending to boost the economy"

"The volume of empty apartments across the country hit 91m sq metres at the end of last year, up 32.3 per cent from a year earlier, according to official figures. Those numbers included neither the huge volumes of completed real estate projects whose owners are waiting for market conditions to improve before they put them on the market, nor the estimated 587m sq m or apartments sold in the past five years but left empty by their owners."

Not good. In my last post, I argued that 5 % growth wouldn't be a catastrophe for China. But if China can actually manage to achieve those 5 % growth, that is an entirely different matter...