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Expert: Kunming's property prices could drop by 30 percent

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Like any other Chinese city, Kunming has to deal with plenty of fake or counterfeit items, but one prominent economic expert says the city's – and China's - economy is being threatened by fake data about its real estate market.

Speaking at Yunnan University on Saturday, Dr Ma Guangyuan (马光远) of Peking University's Venture Investment Institute said that although the Chinese government has enacted strict policies to regulate the local property market, it has had issues with enforcement.

Were the government's efforts to enforce its own policies more effective, the Kunming real estate market would not be in its current state in which the supply of new property is rapidly increasing while property prices are also heading steadily upward, Dr Ma said.

Ma said the reliability of much of the information pertaining to Kunming and China's real estate markets – especially on the internet – is extremely unreliable and is having a negative impact on the industry's development.

His comments come on the heels of a recent criminal case in Kunming in which 2,000 individuals and 40 companies were tricked into investing 300 million yuan (US$45 million) in a nonexistent real estate project.

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buckaroo

when will this %30 drop happen? I'm up to resign my lease soon and she wants to increase by 1000rmb!

The delusional frenzy isn't going away until people realize that demand just doesn't meet supply these days. Unfortunately the government has been pounding the Chinese with propaganda about buying and owning property for so long that very few even want to consider that there might be a problem or 10. I have a major issue with the fact that you can't actually own the land that your property is situated on and frankly I doubt that leasing land from the government and the fact that you don't seem to have any legal options in cases of disputes (ie massive corrupt real estate developers) is something you can build a solid real estate market on in the long run. Something's gotta give.

The sad fact is that Chinese will buy property reguardless of the prices and developers use this to their advantage. The single most important 'requirement' to any Chinese is to own their home at any cost. This is the grand illusion the entire real estate market is based on. It has allowed speculaters to get filthy rich, and drive the market far beyond any senseable prices.

Now throw in the govt's policy of wholesale destruction of existing property throughout China, and you have a perfect storm creating massive demmand for builders. Also creating huge rent increases for existing rentals. It will be many years before anything "gives" as Danmarin put it. Prices may fluctuate here and there, but they will continue up for a long time. Govt attempts to curb specualive buying has proven time and time again to be nothing more than a finger in the dike.
Govt policy, dishonest developers, and scammers have created a monster that will permiate every sector of China's economy before too long. In the near future, the "have and have nots" dividing line will only get worse. That is what the govt better be most worried about.

Bucko. I seem to remember that you've bought real estate around these parts recently. How did it work out? Did you have any doubts as to the possibility of a ruptured bubble? My girlfriend wants us to buy a place but I see a lot of the prerequisites present for a rupture over the next 1-5 years although the "Chinese characteristics" might play enough to keep it away for now. Did you find it daunting to buy a place blind that wont be ready for quite a while? Did you meet any obstacles as a foreigner that a native Chinese wouldn't? Aren't you the least bit worried that in 15-20 years some developer will have you kicked out for peanuts and the promise of a new apartment (and 2-3 years of waiting for it) in the larger building he is proposing? I know I am since "rights" as I know them don't mean the same thing here.

Danmarien, my biggest hurdle was buying on paper. Took me a few years to be comfortable with that. Secondly, I bought because I wanted a new home and not too concerned about the future returns. However, I paid 3000 per sq m at the tome, so I don't think any bubble burst will have much effect on me. My house is valued at over 15k sq m now, and I'm not getting it until next Jan. I've already been offered 650,000 for it and currently only have 200,000 in it. But as I said, I bought it to live in so I won't sell it. I have no worries that some developer will buy out from under me. Can't happen. This is located in the New City and they won't be changing anything there until long after I'm gone.

My advice would be simply buy for yourself and not speculate any investment return. Although you stand little chance to really lose, China is a dangerous place to get involved with real estate purely for a quick buck. The way I look at it is I get to own a nice property for less than half what it cost in the US anyway. Maybe "own" is too strong of a word, but you get my meaning.

Hey, what the hell, can't take it with you right?

Speculation creates the bubble - nothing new there - the trick is to wait for each bubble "pop". Speculators tend to buy fast and unload when they reach their targeted profits - as they have to balance debt service vs appreciation.

Just outside Kunming - new chenggong area I think - they had a mini-bubble pop - my buddy tells me he got temporarily hammered - bought his place (to live in) for around ¥250. Few months later the properties dropped to just over ¥100 - which is a GREAT buy for +200sm apartments. I was seriously thinking about it - except for the commute horror (gotta buy a car) and other stuff. If the light rail drops off nearby (in 2-3 years) - I'll give it more serious thought - but I hate driving in KM (or LA or Seoul - Tokyo's not so bad except for the insane taxi drivers).

Personally - I prefer to buy in the inner city - regardless of slum or penthouse - property prices in the inner cities tend to be stable and carry a premium - not to mention the convenience of being centrally located...traffic, smog, and noise aside. Everything tends to be within walking distance - after coming from a California culture of driving across the street to visit the neighbors - a short stroll is rather quaint.

The not allowed to own the land thing is kind of a city planning thing. It allows the gov to tear down dreary drabby old buildings every 30+ years and put up taller and bigger dreary drabby new buildings to accommodate population growth. Too bad the schools don't improve with the construction (point for the KM city planners to ponder for inner city megaprojects).

i think the biggest issue we have to understand is how much can china govt sustain the bubble, if you notice in the news the peoples bank of china which is like the central bank of all banks already raised their interest rates

if you read it on the news youll know what it means, but to those who doesnt understand normally central banks do this to try to prevent inflation.

china economy is growing at a very fast pace that it seems there are already traces of possibility of bubble economy.

by increasing this, will lead to a stronger rmb and also control the lending or borrowing of money. such can be seen in the housing market. if a lot of people is borrowing money from banks or from the govt from housing loans it wont be long that there will be a void of money since it will take a lifetime till they completely pay for it on a normal basis.

its the job the govt to control this or else a collapse is inevitable. aside from this if you read the news, kunming present projects to improve the city and all like the subway and etc used already what should be money not just allocated for this year but for the coming couple of years.

im still waiting, as someone spoke invest when a lot of people are afraid to, so its a waiting game.

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