Of course, I believe that the Chinese Housing Bubble is real and it will happen. But there may be evidence that the housing bubble is sustainable. Sustainability is only possible if buyers can consistently buy houses and the price continues to increase in price. Many Chinese over the last decade have participated a speculative buying of houses in which they hope that it will increase in price. Housing has turned into a investment and it is possible that housing is the traditional Chinese investment. Just as the the stock market has been America's main investment in the last century, China may view real estate in the same way. China may view real estate as such a traditional investment because they have not always had a stock market. The stock market in China is relatively new and was founded in 1990. Normal civilians may still be adjusting to this new "stock market" idea. Many companies on the stock exchanges in mainland China are nationalized. A regular Chinese person cannot be expected to invest in private companies for their retirement. And such an unstable and unproven Chinese stock market may not be convincing to the Chinese people. Real estate is the answer, where it is easy to buy, familiar, popular, and many Chinese families buy their beloved child a home. In China it is normal for parents to buy their child a home and for that home to remain empty. The property value is expected to go up. Of course building the house may be cheap but location will always sustain a decent value in a small Chinese city of 15 million people. If real estate is China's traditional investment then real estate may continue to provide the best returns. Trust in markets are small and real estate is something you can see. Time will tell whether the Chinese Housing Bubble will pop. Of course, I continue to believe that this bubble will pop--but it is important to understand WHY this bubble is building and what may cause housing prices to be sustainable.
Of course a decreasing population will increase the supply of homes, and if people stop migrating to cities--there may be an epic collapse.
Of course a decreasing population will increase the supply of homes, and if people stop migrating to cities--there may be an epic collapse.
1 comment:
Personally I think this bubble will pop nomatter what, and let nature take its course. But I tried to find a solution, and I do think that pension funds can either pop the bubble...... or make that real estate market grow as a more normal rate (4%) yearly for years to come.
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