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Shanghai housing boom turning to bust
By Samuel Shen and Irene Shen (China Daily)
Updated: 2005-12-15 06:50
Young banker Yan Lei toured the tree-lined gardens, sculptures and fountains
of Baoland East Garden, a new Shanghai apartment complex, but he did not buy,
deciding instead to hold out for lower prices.
"Home prices in Shanghai have begun to fall, so why hurry to buy now?" said
30-year-old Yan.
He was not willing to spend the 1.96 million yuan (US$242,550) the developer
was asking for a 140-square-metre unit. Yan thought less than two-thirds of that
would be enough. "The environment is ideal; the prices aren't," he added.
China's most expensive property market has been deflating since June, when
new taxes aimed at speculators halted a six-year boom during which prices almost
tripled. The slide may deepen as developers increase supply and demand wanes in
a city where a typical new apartment costs more than 50 times the average annual
income.
"Property prices in Shanghai have risen out of the reach of ordinary
citizens," said Qiu Zhicheng, an analyst at Xiangcai Securities Co, who forecast
prices will drop 10 per cent in the coming year. "It was only a matter of time
until prices fell."
Real estate has helped Shanghai's economy expand by 12 per cent annually
since 1990. The city of 17 million people has built more skyscrapers in those 15
years than there are in New York. China's central bank described the city's
second-hand and luxury home markets as "bubbles" in a report issued in August.
Home prices dropped by 7.9 per cent between June and
October, according to the city government's Shanghai Home Index, which has not
reported a more recent figure. The index more than doubled between December 1999
and May.
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