residential real estate prices are headed down.
This is a buying opportunity in China¨s most attractive long
politics, real estate markets are a locally driven.
In the Shanghai residential real estate market, a number of local
factors！most particularly a relentless stream of new supply, but also
(the scariest part) the coming onto the market of resale units
previously taken up by small and large speculators, against a situation
in which virtually all currently available buyers have already
bought--are pointing to a medium term correction and drop in (now
artificially inflated) prices. I
expect a 30 percent drop over a period of two to three years.
term, however, the best properties in the best locations are good
investments, even now. Shanghai is without any doubt the best place in China to own
property. And many
successful people within China, and！a very big factor, never to be
neglected！Chinese around the world, will be buyers in Shanghai over
time. This is why the
coming correction is a buying opportunity.
growth in China is headed lower, and the reason is not SARS.
It is the weakness of demand from domestic consumers and
deflation of the investment bubble that has！together with
exports！been the key driver of growth during the past year.
investment bubble will certainly deflate！and could implode, with
highly negative consequences！for two reasons:
First, the Central Bank has (too late) begun to rein in bank
lending to the real estate sector.
Actually, the new lending standards would be considered minimally
prudent in healthy market conditions in the U.S.
In China, where the real estate sector is definitely overheated,
they are being called Draconian, which only indicates how reckless！if
not criminally corrupt！the banks have routinely been in relations with
reason is that government spending on infrastructure projects！financed
almost entirely by borrowing！is being cut.
The government is reaching limits on its ability to pursue
Keynesian demand management.
I expect to follow now is loose money and inflation.
This will help the banks, but will do nothing to slow the decline
in real GDP growth to a level of 5-6 percent for this and, probably, new
banks will not get a big bailout because the government cannot afford to
give them one.
Read my June 4, 2003 Op/Ed piece in The
Asian Wall Street Journal.