Read our property and real estate news and updates on the property market in China including major cities like Shanghai and also Hong Kong. Information on where the Chinese real estate market is heading in comparison with the rest of the world. Reports and statistical information on property for sale in China whether it is residential or commercial property.

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Chinese real estate slowed in the first two months of this year, while sales were down year-on-year from a year previously, according to official data released on Thursday. The Chinese economy, that once generated panicky headlines in August journals like the Economist and the WSJ, has been slowing now for some time, but the knock-on effect from a cooling property market could impact industries as diverse as cement and furniture. That has serious implications for a country where leaders are trying to juggle economic reform with maintaining economic growth and full employment.

We’re currently seeing the first slowdown in the acceleration of house prices for over a year, a strong sign that the market as a whole is cooling.

Real estate investment rose 19.3% January-February from a year previously, which is slower than the 19.8% annual growth rate in 2013, the National Bureau of Statistics said. That means that while the property market has been acting as a parachute for the Spanish economy and an engine for the American economy, it’s currently working as a dead weight for the Chinese property market.

Property sales dropped 0.1% measured by floor space, and 3.7% in terms of value, in the year’s first two months. That doesn’t sound too catastrophic, but it’s a sharp turn for a market that saw a 27.4% slump in the first two months of this year compared with growth of 13.5% in the same period last year. The Chinese economy as a whole is undergoing a slowdown, with the flow of aggregate financing dropping away 2.5% in January and February from its 2013 equivalent, according to the People’s Bank of China.

Nicole Wong, a property analyst at CLSA investment banking, said that the situation was largely caused by oversupply, which ‘has a greater bearing on slowing down the property market this year.’

The Chinese property market has been deliberately cooled over the last two years after a period of red-hot boom that saw entire cities built, sold to investors but almost empty. From one side, pressure from local governments has forced down demand, and simultaneously banks are tightening lending to the property market. A third source of pressure has now been added to the mix, though: ‘the current liquidity tightness is unlikely to last into the second half, because economic growth isn’t that great,’ as Ms. Wong points out.

Central government has been supportive of these measures and Beijing will be pleased to see a mild cooling in a market that it’s been struggling to contain for over four years. But that runs the risk of an ‘over-correction’ – a sudden sharp downturn in property that could drag the Chinese economy down after it.

The Chinese plan has had to be locality-based in a country so large and differentiated. Central government will continue to try to curb speculative demand and employ policies tailored to China’s different cities and zones., the country’s premiere, Li Keqiang, reiterated on Thursday. State media quoted Vice Housing Minister Qui Baoxing as saying that there’s no chance of China’s housing market having a major crisis within the next two years. That doesn’t chime with the opinion of Nomura Holdings economist Zhiwei Zhang, who pointed out that ‘a sharp slowdown in property investment is possible and would increase systemic risks.’

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China’s emerging middle class are increasingly leaving the country to live abroad, according to the most recent statistics.  In 2010, 508,000 Chinese left for the 34 countries that make up the Organization for Economic Cooperation and Development.  In 2011, the United States received 87,000 permanent residents from China, up from 70,000 the previous year, indicating that 2011, for which figures are not yet available, will show an increase in the numbers leaving China.

To some extent this is a result of their highly regimented society coming to more closely resemble that of other large, powerful free market countries.  As the economy and society were liberalised  the housing market boomed and pushed the price of an apartment beyond many people’s grasp.  At the same time, unemployment soared and a generation gap has appeared, as children find themselves more attuned to the new society’s mores and expectations than their parents.  There’s a feeling amongst middle class Chinese that the world is changing too fast.

Some are leaving because China feels instable to them.  A new Chairman of the one-Party state’s governing Communist Party, Xi Jinping, is due to be installed on November 8.  His policies are uncertain, and Chinese professionals are becoming more aware of the precariousness of affluence without influence.  The next government won’t be chosen by elections as we understand the term.  Cao Cong is an associate professor at the University of Nottingham’s School of Chinese Studies who has studied patterns of Chinese emigration.  He observes that middle class Chinese “don’t feel secure for their future and especially for their children’s future€¦ they don’t think the political situation is stable.’

The Chinese middle class is as ill defined as any other – an income of $10k is one standard.  The term is usually taken to refer to a cohort that eats out, owns a home and a car, and is conscious of foreign brands and foreign ideas.  In a highly conformist society the 100 to 150 million people who make up this group behave in public, but in private they can be highly critical of China.

One reason for this is that the Chinese middle class are unlikely to have the positive experiences of the American middle class; the resource-stripping that has powered the Chinese economy’s phenomenal growth up to now is clearly unsustainable, and in its place “cleaner’ modes of living are being proposed.  The word “green’ doesn’t sell well in China, but that’s what’s meant by those who put forward plans for more vertical dwellings, more shared services with an emphasis on access rather than ownership and more ecommerce and elearning to cut down on costly and environmentally detrimental commuting.  However, all these things sound like a return to China’s collectivist past and many Chinese with valuable skills see the chance of a better life lying elsewhere.

There’s additional reason to feel concern for even basic safety in China.  Earlier this year evidence emerged that one of the most senior figures in the Communist Party, Bo Xilai, operated a personal fiefdom involved in extortion, torture and murder.  Liang Zhai, a migration expert at the university of Albany, says, “people wonder what’s going to happen two, three years down the road.’

Many middle class Chinese children have been prepared from childhood to go to the West.  Regimented lives of English Conversation lessons and English names, piano and extra maths are meant to result in a young adult who might go to America to study.  But increasingly it’s not just these children or their professional parents who are leaving China.

Zhang Ling owns a restaurant in Wenzhuo, a coastal city in China.  He and his blue collar extended family pooled their resources to send his son to high school in Vancouver, Canada.  The plan is to get him into a Canadian university and obtain permanent residency.  Potentially the rest of the family could move overseas: “It’s like a chair with different legs,’ explains Mr. Zhang.  “We want one leg in Canada just in case a leg breaks.’

Photo credits: Faungg via Flickr

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Apartment China

The Chinese authorities have succeeded in making good on their promise to lower property prices, but this bid to make housing affordable for the greater half of the Chinese population mightprove particularly costly for the Chinese economy as a whole. The residential sector is a major contributor of short-term economic growth in China, and accounted for an estimated 6.1% of its total GDP in 2010. Falling prices have already dragged down investment in the country’s real-estate market, and are expected make a similar dent in its demand for steel. Given the already dismal global economic outlook, a sluggish Chinese economy could then setoff more alarms than fireworks.

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Back on board the China property market rollercoaster as we ride into 2011. Before the last stop we watch a sub-index of property stocks on the Shanghai Composite Index slump 28% at the end of last year on the promise of new property taxes to curb growth. Now as it seems unlikely the taxes will ever come to bear, despite revelations that prices grew much faster last year than previously thought, we can watch the same index climbing once again having growth 8.4% last week.

The government has unveiled its latest policy initiative to cool the market; tightening regulations on foreign purchases.

Last year we see that foreigners invested 20.1 billion USD in Chinese property, a whopping 48% growth compared to 2009, but a drop in the 410 billion USD ocean of total property investment in China.

It does seem like the rollercoaster is a bit unstoppable at the moment. The central government may want to cool the market, but provincial governments rely on land sales for revenues, the state owned banks are fuelling growth on financing loans for property and land purchases, and state owned developers are buying up land as well.

Passing any law to hurt the market does look difficult, especially because no one wants to cop the blame for bursting what looks like one of the largest real estate bubble’s the world has ever seen.

So, who cares if it gets harder for a few foreigners to buy if it takes some of the pressure out of the market?

You guessed it, the government, right now no government in the world wants to hinder foreign investment, even China as the next wave of emerging markets — the CIVETS, Columbia, Indonesia, Vietnam, Egypt, Turkey and South Africa — take over from the BRIC nations as the fastest growing economies in the world.

Because of this, it is just as likely that next to nothing will change in the laws regarding foreign purchases, leaving the status quo rollercoaster to rock and roll onwards.

Meanwhile we sit here wondering just how hot the Chinese property market is, biting our nails at the prospect it is likely much bigger than the US bubble that’s going pop crippled the global economy.

All that is true, the bubble is bigger, in fact according to recent reports the market is much hotter than we ever thought.

According to the China Real-Estate Index System, compiled by China’s largest online real-estate brokerage SouFun, prices for residential properties rose 47.1% in Hangzhou, 37.9% in Chongqing and 37.1% in Beijing. Official figures from China’s National Bureau of Statistics show prices up less than 10% in these cities in the first 11 months of the year

The gap between official indices and reality would seem to be confirmed by the reality itself. We know that land sales were soaring, but prices were only growing in high single digits. We also know that state entities in Hong Kong would combine to force up the prices of land at auction, in order to accelerate price growth on the secondary market, something that could easily have been replicated on the mainland.

Maybe we shouldn’t be quite so scared though. It is true; the Chinese banking system is in much better shape than its US counterpart. When the US crash crippled the world it was because the system had been allowed to eat away at itself for so long that mortgage lending became almost completely unregulated, and all parties became way too exposed to sub-prime mortgage lending. The Chinese banking system is still heavily regulated, and reserves are healthy. Chinese economic growth and the population are huge, not to mention the latter growing rapidly in numbers and affluence. There are numerous reasons to be hopeful that the Chinese bubble will not affect the world.

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The record 73.1 million people attending the month-long World Expo in China during October pushed up rents and hotel rates in the Shanghai neighbourhood, which are now falling sharply, by up to 50% according to reports.

During the event two bedroom apartments in the area surrounding the Expo Park venue on the banks of the Huangpu river were fetching as much as 6000 – 10000 Yuan per month (with those in a 1.2 mile radius attracting the highest rents), but now rents have fallen 50% in the area according to Chen Yi, manager of the Expo branch of the Centaline Property Agency Ltd.

Hotel rates in the area fell by 47% from October to November, according to Qunar, China’s largest travel website tracking the city’s 2,000 hotels.

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Downtown Apartments in Shanghai China

Further evidence has emerged that the Chinese government’s efforts to cool the housing market are finally bearing fruit. According to the government index of 70 cities, house prices fell 0.1% in June compared to May, the first month on month decline since March last year according to experts.

Experts believe that this is the first decline in what will become a downward trend to see out this year and possibly start next year.

“This is a turning point of the overall property price trend,” Yang Hongxu, a Shanghai-based analyst with E-House China R&D Institute, told AFP.

“The decline will continue for several months once the trend is consolidated — probably lasting into the end of this year or the beginning of next year,” he said.

One has to agree with this prediction really, because now that prices have turned investors — confidence dented — will almost certainly adopt a wait and see strategy, and there could also be a major rise in supply as those left holding the hot potatoes try to off load them before their profit evaporates.

There is no way to suggest that confidence won’t be dented, because on a run of record growth like the 16 month run just seen by China, people start to believe that it will never end. This has been especially true of China, where this belief was compounded with regular reports from realtors and supposedly impartial analysts stating that the massively rising population [Can’t find a Link to a quote of analysts making such bullish statements, but I know I have read plenty of them, maybe you can have better luck] and rapidly growing affluence would sustain the growth forever more.

Maybe it would have done, but the government has worked hard to end the run of record growth, as evidenced by the fact that June prices were still almost 12% higher than June last year.

The measures started off quite small and highly targeted; things like increasing down-payments on second home purchases, and trying to loosen the relationship between realtors and mortgage brokers. Both perfectly good measures: one aimed at reducing run-away speculation and the other at reducing the likelihood of lenders giving out the level of bad-loans that crippled the US, UK and Spanish banking systems, and all aimed at cooling the market without crashing the economy.

The main target of the government’s efforts has always been the riskiest of speculators, the buyers that would see off plan properties change hands several times before they had even been built.

The first would have been immediately successful in the wider aim, because it meant that speculators would have a higher cash-to-credit ratio, assuming they didn’t scam the system, for instance using friends, family or even their prospective tenant on the mortgage document so they could get a first-timer deal*.

The prospective tenant would have been tempted into it on the basis that their rental payments would go towards the purchase of the property. In this the original speculator would still win because they tenant/buyer would pay a higher price, thus guaranteeing a profit on the property. Anyone with a poor credit rating would surely jump at such an opportunity, provided the profit was not unreasonable, though the main candidates would be close friends and family given the strict judicial system in China.

Apologies for the digression, but it is necessary to show the potential for the government measures failing to cool speculation. Not least because the measures did fail, and certainly not least because the government’s subsequent measures were also aimed at cooling speculation.

Measures that saw third home loans severely restricted to the point of near extinction, and restrictions tightened on advance sales of new developments — off plan is of course primarily the foray of the speculator, especially in a market entirely fuelled by internal buyers**.

**The Chinese property market has seen such incredible growth fuelled entirely by internal Chinese buyers; which in turn saw it fuelled by the massive growth in the Chinese economy, which continued throughout the international downturn. Part of the reason the bubble inflated was of course the fact that the government initiated stimulatory measures in a pre-emptive strike for a recession that never came. This of course caused a liquidity surge, similar to that seen in Australia and Canada, but far worse because of the level of growth the Chinese economy maintained.

In fact, it is because the growth is fuelled by internal buyers that the government’s measures have eventually worked. There is sufficient money and affluence is growing so rapidly that those fortunate enough to be a speculator in the Chinese property market needn’t risk the wrath of the government by taking the kind of shortcuts mentioned above*.

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The Chinese housing market is seeing phenomenal growth in prices. Despite the global slowdown, property prices in Beijing and Shanghai have quadrupled in recent years, threatening to push house prices beyond the reach of Chinese families.

Because of this, and the fact that most people expect the phenomenal growth to continue, thousands of Chinese families are stretching themselves very thin to buy a house now, for fear that prices will spiral out of their reach in the coming months and years.

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The global financial crisis is rapidly expanding into Hong Kong now. Window displays at some real estate agencies in the city advertise heavily reduced properties, last minute reductions and even cash incentives to prospective buyers.

Poon, a property agent for Midland Realty in Hong Kong said “Before September our branch was making two to three million Hong Kong dollars (256,000 to 385,000 US dollars) every month, but now it’s only around 50,000, a 98 percent drop in revenue”.

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Lewis Hamilton @ Shanghai GP [Credits: Emilgh]

With the world seemingly against him, Lewis Hamilton proved them all wrong and raced to a fantastic win in Shanghai’s Formula 1 on Sunday. He was labeled arrogant by the press and some of his rival drivers even pledged to help his title rivals in order to pay him a lesson, but regardless of all the talk and chatter, the Brit is now in a sweet position to become the youngest world champion ever if he manages to finish in the top five on Nov. 2nd in Brazil’s end of season race.