Shanghai real estate market crash story in LA Times
 

This isn't exactly breaking news, but the LA Times picked it up --

"Shanghai's housing bust comes after a doubling of prices in the previous three years, a run-up fueled by massive speculation. With China's economy booming and Shanghai at the center of worldwide attention, investors from Hong Kong, Taiwan and elsewhere were buying as fast as buildings were going up. At least 30% to 40% of homes sold were bought by speculators, says Zhang Zhijie, a real estate analyst at Soufun.com Academy, a research group in Shanghai."

"In Shanghai, people blame the popping of the housing bubble on the central government, which has applied one measure after another in the last year to quash excessive speculation and price increases."

"Banks were ordered to raise their best rate on home loans to 5.5% from 5%. Home buyers were required to make down payments of at least 30%, up from 20%. A 5.5% capital gains tax on home sellers' profits was imposed. Beijing also levied a 5% tax on the sale price of homes sold before two years of ownership."

http://www.latimes.com/business/la-f...track=morenews

Do you think something similar could happen in the US?

Lots of people buying highly leveraged "investment" propreties too.

http://img8.imagecash.net/preview/701468415.jpg

glad I don't live in Shanghai

Good action by the govt

The gov prevented it ... that's good . The crash probably wasn't too bad

Its pretty obvious that the wild ride up the last few years is done with, whether property values continues to grow, or drops is the question.

Property value in Socal is already starting to drop. VERY SLOWLY, and very little, but some people wil homes in the 300k range have had to drop thier prices by 5 and 10k to sell.

A 300k home in so cal is in the ghetto. Yes its slowly coming down in southern California as homes are staying on the market longer and sellers are forced to drop pricing to create interest. However, this is the slowest buying time of the year, wait until March to assess true market conditions.

I'm wondering if some of the price drops are a result of seasonality and owners who want to move their property fast as opposed to an actual dropping market. (Edit, yeah thats what I mean lazycash)

That being said.. technically real estate isn't supposed to "pop" like the stock market, simply because its not very liquid. Rather, its been described as slowly deflating. Owners rarely know the true value of the property until a buying actually has it.

I'm curious about the Chinese government's intervention in the market. We are seeing similar things happening in the US, with the rising of interest rates, and other moves such as the government raising the minimum credit card payments. Not really huge or extreme actions, but certainly trends to watch. For example, the Austrian school of economics argues that government intervention is what actually creates wild booms and busts in the market as opposed to wild speculation (which otherwise would not happen due to the lack of cheap credit, or would financially wipe out those involved.)

The jury's still out on this one. Another key factor to consider re the "bubble" is that the Baby Boomers are retiring now and moving their investment portfolios to fixed income bonds/securities. This has the effect of lowering interest rates (see Japan's savings pattern). This may sustain the 'bubble'.

Regardless, it all depends on LOCATION LOCATION LOCATION :thumbsup

Some of these measures are not just designed to slow speculation but also to put the brakes on a lot of shoddy semi authorized construction projects. I don't think pricing will go down in Beijing as I have been told that most construction in the city will stop after 2006 so they can clean it all up for the Olympics.

It's hard to imagine that anything going on in Shanghai or Beijing really reflects upon the USA market as China has issues unto itself.

I never understood why our American government allows foriegn countries to buy land on our soil.

Its Amercian Soil, not Chinese nor anyone elses.
Only folks that should have American property are Americans.

No brainer.

Well, the article itself says "Although the city's 20 million residents represent less than 2% of China's population of 1.3 billion, Xie says, Shanghai accounts for an astounding 20% of the country's property value. About 1 million homes in Shanghai alone ? about half the number of housing starts for the entire United States in 2004 ? are under construction."

I agree with you, Shanghai is a completely seperate market from the US. However, I think there are som simularities to, most specifically, to Floridia's condo market. Rapidly growing inventory being sold mostly to speculators, popularity of pre-construction contracts, and most importantly, speculator psychology.

$5 submissions -- speaking of Japan, they've had a slow real estate ride straight down for 15 years or so now. I think that a growing population, especially thanks to both legal and illegal immigration, will probably mean that housing supply in the US is not in over supply, and may never be. However, that doesn't mean that in the short term certain investors who have engaged in more risky practices aren't headed for trouble, especially with certain factors like hybrid mortgages reseting this year and possible a slight increase in interest rates.

foreign direct investments. its one of the many techniques to invest in a country .

I guess since your a master at international business maybe you should stop designing and join some sort of economic department in a university?