Chinese real estate - hot as ever. But when will it fall?
Last week, the Chinese government implemented yet another measure to reign in the uncontrollable speculation that is gripping the Chinese real estate market.
Already implemented this year were new property sales taxes in Shanghai, and nationwide minimum down payments (for second properties) of 50-60%. This is on top of the Central Bank's three interest rates hikes since October. Now, as of this week, there are new rules for ownership in cities all over the country. In Beijing, for example, only residents are allowed to buy real estate (as proven by 5 years of tax returns and a residence card), and are limited to only one investment property.
It seems that due to strong new beliefs in capitalism, mixed with ancient beliefs about luck and prosperity, no one is getting the hint. Home prices are expected to increase another 6.4% for this year, despite public complaints about soaring costs.
It is impossible to say for how much longer this nonsense will continue. But one thing is certain - the longer it lasts, the more devastating the fall will be. My crystal ball, though hazy, sees the potential for riots.
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"Speculation is only a word covering the making of money out of the manipulation of prices, instead of supplying goods and services."
Henry Ford
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