Found this article in the South China Morning Post today. It does not tell us anything that a good observer would not have noted already. It’s worth noting in the context of all the discussions I had with the wife since we moved to Shanghai.

From day one she was bending my ear about buying a property here as an investment. She was not alone. Quite a number of friends, also married to Chinese ladies, gave me the advice to buy one or more apartments here. I was always against it, not because I am against a good investment, but because I did not want to be chained to some real estate which I might never be able to sell. Let alone at a profit.

The same guys who told me 8 years ago to buy, are sitting in their apartments now, which are (on paper) twice or three times the value they bought them for. Did any of them sell them and cash in? Fuck, no. Who in his right mind would buy an old apartment (with the shoddy quality here that’s anything over 5 years old), when there are shitloads of new ones on the market? I don’t envy them when the whole shebang collapses.

I am still happy I did the right thing, and saved my money to buy my boat in the near future. Once the shit hits the fan here (which is only a question of ‘when’, not ‘if’), or when I am finally sick and tired of the whole zoo here, I only have to pack and leave. The wife still gives it a try every now and then, but less and less frequent. Guess she has finally given up hope to convert me into the camp of property owners.

Mainland cities face property bubble threat

REUTERS in Beijing

The ratio between house prices and rental rates in several of China’s leading cities has soared well above levels that often indicate a property bubble, according to an official study.

The report from the Chinese Academy of Social Sciences said the price-to-rent ratio for second-hand homes had crossed the danger line in large urban centres including Beijing, Shenzhen, Shanghai and Hangzhou, Xinhua reported.

The ratio measures the rent for one square metre of floor space divided by its sales price.

The lower the ratio went, then the healthier the housing market was, academy researcher Shan Jingjing said.

An increase in house prices not matched by a rising rental market can signal an unsustainable price spiral, the researcher said.

“The international warning line is one-to-200. Once the ratio goes over the line, the market is in danger of a bubble,” the report said.

In the central areas of the four cities Xinhua listed, however, the ratio had already reached between one-to-270 and one-to-400.

The academy earlier this year urged Beijing to tighten its credit clampdown on the country’s property sector to prevent the sort of real estate bubble that crippled Japan’s economy in the 1990s.

China has taken a series of measures to rein in runaway investment in its property market. It has tightened credit supply, raised bank reserve requirements and interest rates, and imposed a property transaction tax.