So many markets busting at the same time, HP needs a staff to keep up!! We sure went from theory to reality quick, didn't we?
SHANGHAI, CHINA
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 defaults on loans.
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.
Shanghai's housing bust comes after a doubling of prices in the previous three years, a run-up fueled by massive speculation.
March 06, 2006
Around the world we go: Shanghai's housing bubble bursts, causing some panic
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4 comments:
Wow looks like it only take 1 year for the condo price in Shanghai to drop 1/3. That's pretty quick. They mentioned about 30-40% speculation and that reminded me of Phoenix area last 2 years with similar 30% or more speculating buying. So forget those stupid comments from the NAR, RE people kept feeding the public BS about home price very sticky on the way down and it would take many years. What did they base on to say home price sticky on the way down? Now I think not. So buyers out there you don't have to wait so long for price to come down. Just look what happen in Shanghai home market.
Shanghai came down hard because of government intervention.
No the real cause for the big drop is
"Shanghai's housing bust comes after a doubling of prices in the previous three years, a run-up fueled by massive speculation.
With China's economy booming and Shanghai at the center of worldwide attention, investors from Hong Kong, Taiwan and elsewhere were buying as fast as buildings were going up. At least 30 percent to 40 percent of homes sold were bought by speculators, says Zhang Zhijie, a real estate analyst at Soufun.com Academy, a research group in Shanghai."
That article does sound rather thinly sourced. I just went to Shanghai last December and I don't see the 1/3 to 1/4 drop, yet. There's some relative bargains to be picked up, especially at the higher end, as price compression works its magic. The second hand market is surprisingly strong and I pity any locals who didn't get into the action 3 or 4 years ago.
If there's any price drops it's mostly builder retrenchment, going from HK/NYC/London expensive to merely outrageous near HK/NYC/London expensive. The price of home to average wage is laughable - $200USD/month wages are common for new college graduates and my uncle just sold his 70 square meter flat to a young couple for $90,000+USD. That place is probably on the lower end of what most young upwardly mobile Shanghainese would consider acceptable.
Basically, if you're a local not making insane money and you didn't buy 3 or 4 years ago, you're screwed and even a 50% retrenchment isn't gonna save you.
Plus, you need to estimate 10-30% of cost of housing on decorating the place. (there are pre-decorated places but they charge a hefty premium and the locals prefer to overdecorate the place to their own taste)
I see a lot of similarities with SoCal markets, except maybe it's twice as bad in Shanghai - ridiculous budget stretching, blatant bank fraud, everyone who bought more than 3 or 4 years ago think they're geniuses and kick themselves for not stretching to buy twice as much, parents buying for their kid, and their homes are definately where high end appliances and finishes and exotic woods go to die. -- and most of them haven't even discovered ARMs and refinancing.
Other bads, most major Chinese cities have absolutely appalling weather for at least 6 months out of the year. High humidity and high heat in summers and bone chilling winters are common. There's no natural beauty for Beijing or Shanghai or most other major Chinese cities. Traffic is already pretty horrible and set to become much worse.
And not dusting every week is not an option. Most middle class Shanghai families need their housecleaners just to keep ahead of the dust.
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