Risky Business: China’s Real Estate Bubble Is Set to Burst
Recent announcements by major foreign institutional investors entering the Chinese real estate market cause me great concern. The timing seems all wrong — China is facing unprecedented challenges to its domestic economy from the global financial crisis and the slowing of global economic growth.
More than one year ago, I predicted that a real estate bubble in China was inevitable and that it would seriously impact the Chinese banks. Today that view is becoming widely accepted and debated.
Most analysts still don’t understand the full impact of the Chinese real estate bubble. It is not isolated to just a few high-growth cities in southern China or pricey markets such as Shanghai and Beijing where speculators pushed housing prices to 15 to 20 times the local housing affordability index (the national average is 7.7 times).
What is not taken into account in studying the real estate markets in China is the huge oversupply of commercial properties,