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- China’s Real Estate Bubble Hits Manhattan – Bloomberg
This time may be different, but I can’t help but be reminded of other recent periods when wealthy foreigners splurged on premiere U.S. real estate. It was usually a sign of overheated capital markets in their home countries.
… the demand for high-price prestige properties also reflects the exuberance that later forced Dubai to take a $10 billion bailout from Abu Dhabi less than 18 months later to avoid defaulting on the debts of a state-backed investment company.
…Japanese investors wasted tens of billions of dollars buying U.S. real estate in the late 1980s. The biggest fiasco was probably Mitsubishi’s ill-timed purchase of Rockefeller Center right at the top of the Manhattan office market, although the Pebble Beach golf resort is a strong runner-up for the size of the losses it inflicted on Japanese investors. Like the Arabs flush with oil money, the Japanese ended up having more capital to invest than good places to put it. Making matters worse, their spending pushed up the prices of every property they coveted far above any fundamental value.
China could be experiencing a similar phenomenon.
We’re sure that it’s happening to some degree, but just how hot it will become before shutting down remains to be seen.
- Slow U.S. home sales should rise if house prices do – Fed study | Reuters
… William Hedberg, a San Francisco Fed research associate, and John Krainer, a senior economist at the regional Fed, wrote in the latest Economic Letter published by the bank. “In the longer run, the link between the level of house prices and for-sale inventories is strong. If prices continue to rise, inventories for sale should eventually rise too.”
- China Stocks Fall as Property Gauge Drops to 6-Week Low on Data – Bloomberg
China’s stocks fell, with a gauge of developers dropping to a six-week low, as surging home prices spurred speculation the government may tighten property curbs. Smaller companies tumbled on concern valuations are excessive.
“The housing price data add policy risks to the market and investors anticipate the government will probably tighten controls over the real estate industry,” said Wu Kan, a Shanghai-based money manager at Dragon Life Insurance Co., which oversees $3.3 billion.
Premier Li Keqiang has come up with no extra measures to rein in property prices since his predecessor Wen Jiabao stepped up a three-year campaign in March to cool the housing market, ordering the central bank to raise down-payment requirements for second mortgages in cities with excessive prices.
- ‘Some Speculation’ in China Home Prices: Saunders: Video – Bloomberg
John Saunders, head of Asian real estate at BlackRock Inc., talks about the outlook for China’s property market. New home prices in China’s four major cities rose the most since January 2011 last month amid strengthening demand as the government refrained from adding to nationwide property curbs. Saunders speaks in Hong Kong with Rishaad Salamat on Bloomberg Television’s “On the Move.” (Source: Bloomberg)