I don't go back as far as the South Seas bubble, but I do remember Hong Kong's periodic property booms and the daddy of them all, Japan's bubble economy, so fat that it has been letting out air ever since and only now is starting to look spent.
A bit of perspective helps when looking at the so-called bubble in residential property in Shanghai. As bubbles go, it doesn't really rate, not compared to Japan and even not compared to the hyper-inflation in commercial property in Shanghai in the early nineties. Remember that? Shanghai offices had the highest rents in the world for a while.
Property has become one of the many sectors in China where commentators throw up their hands and exclaim, "It can't go on like this!" Fat Dragon agrees. But conversely, the alternative is not to stop the sector dead in its tracks.
It's hard to get reliable figures, but property in Shanghai has probably risen in value by about 25-30% in the last year, similar to the pace of recent property inflation in many western cities. A lot of the bleating you hear from locals about the high price of property in Shanghai eerily echoes the complaints you hear now from people excluded from the market in London, Sydney and, during the Internet boom, San Francisco.
Obviously, 25-30% is way too fast. And like many speculative fevers in China, once it gets going, it can only be stopped with a heavy dose of command economy medicine. The banks needed the biggest whack over the head. Having been shoveling savings out the door in an attempt to have their assets keep pace with their liabilities, they have been told to slow down, and it appears they are finally getting the message.
The banks argue that at least with mortgages they have some security, which wasn't the case when they were lending to SOEs. True enough, but when every hostess you run into in KTV bars tells you she has just bought a property – the Chinese version of the bellhop handing out stock tips – then you know the market has problems.
The Shanghai market has to fall also because Beijing says so. The development of the private property market in Shanghai has been a bellwether for the entire country. But with the Zhou Zhengyi scandal and all, Shanghai had been setting a bad example and has been ordered to start setting a good one again.
But overall, private property has been one of the best things to happen in China. As in every country, property attracts odious carpetbaggers out for a quick buck, but it is a small price to pay for people who can now own the roof over their heads, and sell it for profit, which was all but unthinkable a decade ago.