My comment: Nowadays many people is alarmed by home price rise in China along recent years and more in particular in October. I want to clearify three issues.
1) Home prices are (or rather should be) in direct relation to wages in surrounding areas. That is their fair price and what we could call its fundametals. Above that price it could be called a bubble. As wages rise at the end of this crisis in China, home prices rise accordingly. That is not good for consumers, would be much better that they would rise below wages pace, but it does not use to happen in market economies, at least not for long, because builders always tune price and quality to what consumers can afford. Although we have to monitor prices closely, also we have to relate them with the purchasing power of Beijingers. Only if home prices rise above our purchasing power we should call it an speculative bubble. In that case, house would not be used for their purpose (to offer a roof to Beijingers) but they would be used to make speculative profits. Only in that case it would hurt Beijingers as we could not afford them, and in the long term to builders too because speculative business are short term oriented what means that as soon as they perceive better opportunities elsewhere, speculative capital would leave Beijing leave a huge troube behind. 2) Home prices in Beijing and in most Chinese cities are currently much lower than in Tokyo, Seoul or other capitals around the globe. I live in Madrid, where sq meter around the third ring (it would be the fourth ring in Beijing) is above 10,000 Euros per sqm, or above 100,000 RMB or $15,000. In other words, housing in Madrid is above five times higher than housing in Beijing. With current purchasing power growth and overall growth rate in China and in Spain or in Japan, we must be ready to see that price in Beijing will be above housing in Madrid and in Tokyo within some years. 3) At a friendly level, with this message I do not discourage people to acquire an apartment in Beijing. On the contrary, if you are pondering to acquire a new home, I encourage you to do it as soon as you can because prices will not drop in the long term. Also, to avoid bubbles, credit conditions are going to be thighter in the future (in fact, they have been started to be tighter), therefore mortgage loans will be tighther to get and at higher interest rates. In that sense, I think that I told in this group that we acquired a new apartment last month. It is not just an advie for others, I applied my advise to myself too. But, if you plan to do for speculative reasons, think that some governments apply rules of heavy taxation to unhabited houses (via rebate on occupied houses), likely it might happen in China in the future if bubbles arise. Peace and best wshes. Xi Home price in Beijing near 20,000 yuan per sq m http://news.xinhuanet.com/english/2009-11/14/content_12454867.htm --~--~---------~--~----~------------~-------~--~----~ You received this message because you are subscribed to the Google Groups "World-thread" group. To post to this group, send email to [email protected] To unsubscribe from this group, send email to [email protected] For more options, visit this group at http://groups.google.com/group/world-thread?hl=en -~----------~----~----~----~------~----~------~--~---
