Saturday, April 17, 2010
China's a Bubble-2
"It is still on the market, but Charles Tong, the developer of Tomson Riviera, a luxury riverfront complex in the heart of the financial district here [Shanghai], says he is having no trouble finding takers for similarly priced units. 'We're selling three to four apartments every month,' said Mr. Tong, seated in a white Versace easy chair. 'Now, people here want something more luxurious; they'd like a new lifestyle.' ... When other recent booms collapsed--in the [US], for instance--they depressed entire economies. In China's case, a bursting bubble could affect much of the world. China is the fastest-growing large economy and, so far, a main engine pulling the world out of recession. ... Last year, a record $560 billion of residential property was sold in China, an increase of 80 percent from the year before, according to government statistics that are widely considered reliable. And with prices soaring, developers are scrambling to build more mansions, villas and high-rise apartments with names like Rich Gate, Park Avenue and Palais de Fortune. ... In the city of Tianjin, in north China, developers have created a $3 billion 'floating city,' a series of islands built on a natural reservoir, featuring villias, shopping malls, a water amusement park and what they say will be the world's largest indoor ski resort. 'This is wild,' said Andy Xie, a former Morgan Stanley economist who is now an independent analyst. 'By all tradtional measures, like rental yield, this is a bubble.' Speculators are snapping up properties on the expectation that prices will continue to rise, as prices have nearly every year for more than a decade. ... Prices [in Shanghai] have risen more than 150 percent since 2003, pushing the price of a typical 1,100 square foot apartment up to $200,000, according to real estate experts. (Shanghai residents typically earn less than $5,000 a year.) ... The apartment complex's entrance has original artworks by Salvador Dali and well-known Chinese artists. The apartments, a few of which have been decorated by Armani and Fendi, as well as Versace, lease for $7,000 to $17,000 a month--to high-level executives from companies like General Motors. ... Despite the fear of a bubble here, Mr. Tong said prices were just right, particularly because of so much hidden wealth in China. The publicly listed company is controlled by his family. ... The most recent apartment sold for about $2,300 a square foot. The average luxury apartment in Manhattan sold for just under $1,900 a squarte foot in the fourth quarter of 2009, according to Prudential Dougals Elliman real estate", David Barboza at the NYT, 5 March 2010, link:
Jonathan Swift's "Laputa" rises in China. A 1,100 square foot condo in Houston could be had for $80,000 to $250,000 depending upon location. To some extent we are seeing the same effects of monetary inflation in China as say in Argentina, where people are "selling" the local currency to buy real goods. China's a bubble!