Filed under: International markets, Industry, Consumer experience, China, Economic data, Politics, Housing
We have heard and read a lot over the past year regarding the weakening U.S. real estate market, but what about the red hot Chinese market? Some evidence is starting to show that the Chinese real estate market is also starting to soften a bit.
For the past several years, the Chinese government has started to try to curb the rapidly surging housing market, which kick-started around the start of 2001. Now the first signs of a housing slowdown are starting to show themselves, as property brokers are scaling back their operations, or in some cases closing their doors altogether.
Just how much of a slowdown are we looking at? Consider this… in the first week of 2008, home sales in Beijing fell 20 percent compared to the week before. OK, I know what you’re thinking… that’s just one week, we shouldn’t take too much from just one week’s data. Well, that would be correct, so we can’t just immediately assume the worst, but the writing is definitely starting to appear on the wall.
One good sign for China is that the experts are predicting that even in the event of a housing slowdown, conditions are very unlikely to get to the point where they’re in the U.S. No one thinks that prices are going to plummet the way they did across America in 2007, as the country’s strong economic growth should continue to support demand for the time being.
You can be sure of one thing: the Chinese government has definitely been watching the situation in the U.S. and trying its best to prevent a mortgage meltdown from occurring in its country. Raising rates and imposing property transaction limitations are just a couple of ways that the government is trying to prevent a housing bubble.
One of the things that really got America into trouble was consumers’ growing desire to “flip” properties over short period of times. Basically people were buying property that was probably out of their price range, just planning to keep it for a year or two and then dump it in order to keep the profits. That works as long as two factors exist in the market. One is rising prices, and the other is strong demand. Unfortunately for America, both of those factors dried up in 2007 and created the situation that we now find ourselves in.
China is working hard to dissuade consumers from trying to flip properties, and this alone could be enough to keep the country out of trouble.
Just how hard the housing market will get hit in China remains to be seen. 2008 should definitely see things slow down a bit, but then again maybe that is the best thing for the country considering just how fast real estate growth has been over the past 6 or 7 years. I definitely wish someone would have put the brakes on the American housing market a few years back to help prevent the situation the country is now facing.
Michael Fowlkes has worked as a stock trader for seven years and spent the last four years working as an analyst for the on the internet investment advisory service Investor’s Observer
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