Thought we'd go around the world for a bit and peek in on collapsing real estate markets. First up... Shanghai! A bubble is a bubble is a bubble. Just change the names... Phoenix for Shanghai
American homeowners wondering what follows a housing bubble can look to China's largest city. Once one of the hottest markets in the world, sales of homes have virtually halted in some areas of Shanghai, prompting developers to slash prices and real estate brokerages to shutter thousands of offices.
For the first time, homeowners here are learning what it means to have an upside-down mortgage — when the value of a home falls below the amount of debt on the property. Recent home buyers are suing to get their money back.
Banks are fretting about a wave of default loans."The entire industry is scaling back," said Mu Wijie, a regional manager at Century 21 China, who estimated that 3,000 brokerage offices had closed since spring.
Real estate agents, whose phones wouldn't stop ringing a year ago, say their incomes have plunged by two-thirds.Shanghai's housing slump is only going to worsen and imperil a significant part of the Chinese economy, says Andy Xie, Morgan Stanley's chief Asia economist in Hong Kong.
Although the city's 20 million residents represent less than 2% of China's population of 1.3 billion, Xie says, Shanghai accounts for an astounding 20% of the country's property value. About 1 million homes in Shanghai alone — about half the number of housing starts for the entire United States in 2004 — are under construction."They'll remain empty for years," Xie said, adding that a jolting comedown also was in store for other Chinese cities with building booms — including Beijing, Chongqing and Chengdu — though other analysts say the problem is largely confined to Shanghai.
February 26, 2006
Shanghai's hot housing market has fizzled after a run-up fed by speculators, threatening a significant part of China's economy.
Posted by blogger at 2/26/2006