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Bubble repeat in China?

Posted by Scott Van Voorhis January 13, 2010 09:00 AM

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We are still digging out from the wreckage of our own real estate bubble.

Now along comes China with a clear case of runaway real estate prices and all the signs of a fast inflating bubble of its own.

Apartment prices doubled in Beijing and Shanghai in a few years and then doubled again, with potential buyers now frantically chasing the market upward.

And remember all those loan applications with phony incomes? Well it's happening all over again in China as buyers stretch to acquire homes they can't afford.

There's even a hit TV program devoted to the subject, with a pair of sisters so desperate to buy a place of their own that one becomes the mistress of a corrupt official.

To its credit, the Chinese government at least appears to be acknowledging the problem.

It's pushing developers to finish up projects more quickly in a bid to get more units on the market. Chinese officials are also requiring second home buyers to put down 40 percent in a bid to crack down on real estate market speculation.

Embarrassingly, that's a contrast to the years of happy talk we got from both sides of the political aisle here about an emerging "ownership society'' amid a torrent of shady, subprime lending.

That said, I don't want to get too carried away here.

After all, we are talking about a corrupt, brutal and undemocratic government that is desperately trying to keep the lid on a whole lot of discontent.

The fact the problem is being acknowledged at all looks like a desperate attempt to rein in a runaway train.

The Chinese government's insistence that "hot money" from overseas is fueling the bubble also does not necessarily inspire confidence.

Maybe greedy foreigners are to blame for runaway prices, but this looks like a familiar bogeyman being raised to divert popular attention from the failures of China's Dickensian, dog-eat-dog version of capitalism.

Will China's real estate bubble burst? Look out world economy, because it does not look good at all right now.

This blog is not written or edited by or the Boston Globe.
The author is solely responsible for the content.

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About boston real estate now
Scott Van Voorhis is a freelance writer who specializes in real estate and business issues.

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