[photopress:real_estate_restrictios.jpg,full,alignright]First you need to accept that what we are seeing is a massive read estate bubble which in theory could burst just at it did in the United States.
This is a very iffy proposition to make because of the massive difference between the two countries. Although there is little doubt that sub-prime — read shonky throughout — loans were made in China against, charitably, misleading information and that there was a total lack of follow up on the part of the lenders. But to equate the United States directly with China seems illogical and something that leads to false assumptions.
Now, according to the state-run shortwave radio service, China Radio International, the survey was run late last month by China’s State Administration for Industry and Commerce, also known as SAIC.
At a time when China’s central government is already worried about general inflation and a speculative atmosphere that continues to hang over its stock market, restrictions on foreign investment in real estate could stick a pin in the speculative bubble.
Speculators who have been profiting from China’s spectacular growth are likely fearful that restricting foreign investments could touch off a financial-markets implosion similar to the bursting of the dot-com bubble in U.S. stocks in 2000, or like the bursting of the U.S. housing bubble last year.
That’s not likely, although not impossible, to happen in China. The economy seems to be too buoyant.
The Shanghai Security News has reported a real estate survey was initiated last November after China’s Ministry of Construction started to survey existing policies designed to restrict foreign investment in China real estate. It will be interesting to see if it is taken as a real warning to throttle back. Throttling back would generally be seen as being a good thing. Pricing the bubble, bad.
Source: Money Morning