China Real Estate. There Is No Bubble. : China Law Blog : China ...

Every time I am anywhere in China driving by rows and rows and rows of completely empty condominium buildings, I ask the people in the car with me (usually Chinese lawyers) why they think Chinese real estate prices keep going up even though there are so many housing units already available.

Their answer is almost always the same. Because so many people are coming to the cities. I then say something like, "but it seems to me not many of those people can afford to buy their own housing." I then usually get back one of the following three things (or a combination):

1. Silence.
2. "They will be able to."
3. "The Singaporeans and the Taiwanese also like to buy."

I then usually conclude the conversation by adding something brilliant, like, "we'll see," which pretty much does sum up my position on this matter.

The highly respected (by both me and by others) Economist Intelligence Unit recently came out with an excellent report on China real estate, entitled, "The Sustainability of China's housing boom," [you must sign up to download it] that comes down solidly on the side of the Chinese lawyers. The report posits?that urban migration, coupled with Chinese buying bigger homes, will keep driving China's real estate upward and prevent any popping:

In contrast to some conventional thinking the Economist Intelligence Unit (EIU) does not believe there is a major housing bubble in China, although there could be a short-term mild correction.?

A strong underlying demand is growing so quickly that a correction in the next couple of years will be short-lived.

At current rates of construction, China can build a city the size of Rome in only two weeks, and as much housing each year as there is in all of Spain.

Between 2011 and 2020, we expect urban residential floor space per head to increase from 30 sq metres to 41 sq metres.

What do you think? Will?we be hearing a popping sound and, if so, when?

Source: http://www.chinalawblog.com/2011/05/china_real_estate_there_is_no_bubble.html

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