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The Chinese property bubble: time to duck and cover?

Beijing may believe it can maintain China's housing boom, but a growing number of critics say otherwise.


Playing with fire

Outside of the UK, there’s a suggestion that Chinese money earmarked for more speculative property investment is now being directed at markets in the US, such as Las Vegas for instance, where prices could not possibly fall much further.

And yet, foreign investment in Chinese property development actually rose by 57.3% in the first five months of the year compared with the same period in 2010, with Chinese developers receiving almost 40% of their investment in the first quarter of 2011 from overseas.

In April, the World Bank described China’s property market as a ‘particular source of risk’. Revenue from building work is financing local government infrastructure; the banks are now heavily exposed to the construction sector; individual investment has become property-heavy. A number of fund managers are predicting very significant house price falls in the second half of the year. Those that continue to invest heavily in the market might be playing with fire.

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5 comments so far. Why not have your say?

Tony, Wallsend

Jun 29, 2011 at 17:41

A small flat in a Bejing tower block at twenty times in excess of household income? It makes our housing market look positively sober.

PS. Does anyone know what the price/income ratio was in Japanese housing,when it boomed some years ago.

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Anonymous 1 needed this 'off the record'

Jun 29, 2011 at 20:18

dont worry if it goes belly up england will jump in and find billions to help them out from some hidden pot after all england saves the world again.or they will be able to come to england and live. ?

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No name 2

Jun 30, 2011 at 09:21

What about Hong Kong? Is the situation similar to Shanghai or different?

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Keith Simmonds

Jul 03, 2011 at 09:25

My concern is that the Chinese Government will inevitably have to bail out the banks and that will result in large investments abroad being liquidated. American Treasuries look to be uncomfortably exposed.

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Jul 04, 2011 at 12:08

Chinese government have so many cards to play with. The property market will drop like a stone if they simply choose to release a tiny fraction of their property stock. (Civil service and the Military are still holding the prime sites plus umpty rural land)

Hong Kong is different, restricted by lack of land. There is no cure except reverse migration, which is unlikely as we know even Anthony Bolton has migrated over to that side of the globe. Price in HK will perpetually move in one direction until it is fully integrated with mainland China.

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