A report by the economics research institute of Renmin University in Beijing warned that the tightening of cash availability could set off a chain-reaction in the real estate sector. The report said that real estate square footage (actually “meter-age”) coming on the market in the first four months of 2008 rose by over 20%. However, the amount actually sold declined 4% year-on-year. (In the same period last year real estate sales were booming at a 25-percent annual rate.) In other words, we have an excess supply situation that could lead to price declines, followed by declining profits for China’s budding class of real estate tycoons, and declining investment in real estate—the biggest single piece of China’s enormous fixed asset investment pie. The report speculates that this could occur in the second half of 2008 and continue into 2009. Long-time China watchers will recall the forests of half-finished buildings that marked the last real estate bust in China about a decade ago.
Source: Jinghua Times, reposted on chinaprice.gov.cn