Thinking of buying that swank new apartment in the French Concession? Now’s probably not the time.
Shanghai and Beijing’s housing prices, which had been steadily increasing for the past five years, are now in a sudden free fall. The problem seems to be multifold.
Obviously, the burst of the housing bubble in the U.S. has reverberated across the world and hit the market over here. But even though house-buying has generally been safer here in China – Chinese have always had to pay larger down payments on houses and often pay fully in cash – the country has problems of its own.
For one thing, over-construction is widespread in China. Nationwide housing prices are likely to be down 10% to 15% this year, but in Beijing and Shanghai – where construction and speculation reached some of the highest peaks, estimates are closer to 15% to 20%, according to TIME Magazine.
Analysts estimate that there are now about 200 million square meters of constructed but unsold apartments and houses in China, and Ren [Zhiqiang, a development company chairman,] worries that figure will continue to rise without “tangible, positive incentives” for new buyers.
So all those huge new buildings in Shanghai? Wait around til the sun sets and you’ll see how many of them are actually filled (not many). And the government is still trying to motivate developers to build more low-cost housing, which can only drive house prices lower.
Considering that this coincides with a general shrinking of foreign workers’ housing allowances and the value of their respective currencies (the won has been particularly hard hit), buying a house in China is no longer the safe investment it was in the past.
Cartoon from the China Daily.