Real Estate Bubble in China

2476 Words10 Pages
Real Estate Bubble in China: the Present and the Future
2011 Q3
HA _S28

The concern over whether China is experiencing a real estate bubble has increased, especially after Dubai crisis happened. The construction area of both residential and commercial properties has increased by almost 6 times since year of 2000.
China has enjoyed a sharp increase in property price since 2006. Especially, after 2009, due to the large stimulus package, majority of the money went to construction and real estate industry. It further pushed up the property price, leading to a lot families became the “slave of the property” who were struggled to pay the mortgage. Not only the high price has affected most people‘s lives in
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This has been interpreted as a sign of over investment and real estate bubble. In the case, the apartments have all been sold out, even though nobody moves in. because most people believe that property will grow definitely. For investment purpose, most of them prefer to buy one. This kind of behavior has contributed to the high vacancy rate in China,
High Vacancy Rate: since official data are not reliable, the concrete number of vacancy rate is not available from official sources. The reason for this has been that government officials said that, they don 't know what vacancy rate means. Obviously, government is trying to avoid knowing the fact. Somehow, people have provided a rough estimate on the vacancy rate. They are using how many electric meters that have no readings for 6 months as an indicator of vacancy rate. Overall, we got a number of 65.4 million apartments. It is estimated that the vacancy rate is as high as 36%.
With such a high vacancy rate, people are wondering how large the real estate bubble in China will be. James S. Chanos, one of the first foresee the collapse of Enron and earn large profit from hedge fund, gave the answer, it will be Dubai times 1000. A growing number of economists and hedge funds managers have been believed that Chinese economy is a big bubble. Others argue that China is definitely not a bubble, the development is real. There is overheating in some area, but infrastructure construction is still necessary to a
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