One of the reasons the China real estate market is so hot is because wealthy Chinese are buying up property to hold onto real assets, rather than put money in low yielding bank bonds and volatile equities.
However, I am not convinced by his bearishness about residential property, and I think he is making a mistake by looking at China as one unified real estate market.
FORBES: Is Jim Chanos Right About A China Real Estate Bubble?
Concerns over a general economic slowdown in China, plus the eroding residential real estate market has hurt the finance-heavy iShares FTSE China Xinhua 25 (FXI) exchange traded fund, a popular vehicle for retail investors hopping on the China band wagon.
The sales price of new homes decline in China in August as the government high interest rates and other measures take their intended toll on the red hot real estate market, China Daily reported Sunday.
The selling started in Asia as efforts by China to dampen real estate speculation caught the market by surprise.
This, in turn, will be good for China and the world economy, as the real estate market will be in for a soft landing rather than a hard-landing.
To prevent the real-estate market from crashing, China also started a massive public-housing program aimed at lower-income workers.
China was the world's top-performing real-estate market from 2008 to 2012, according to consultancy Knight Frank.
China Vanke, the country's biggest real estate developer by market value, hit the daily up-limit of 10 percent on the Shenzhen bourse after announcing plans to shift trading of its foreign-currency shares to Hong Kong.
The China Real Estate Index System (CREIS) data indicates that the property market is being supported by monetary policy easing, as well as efforts by the local governments to stimulate housing purchases.
When asked to identify three locations and real-estate sector combinations, investors pointed to industrial and logistics real estate in Greater China as the second most appealing sector, behind the office market in Australia.
Some property companies recovered from losses brought about by fear of further tightening in the housing market: Poly Real Estate Group added 1.4% and China Merchants Property Development rose 1.6%.
According to the IMF, there does not appear to be significant over-valuation of residential real estate prices in China as a whole, though there are signs of overvaluation in some market segments.
Mr. Hariharan: With iron ore, for example, we saw that real estate was one of the booming sectors in Asia especially with the rise of Indonesia and the China market.
Most succeeded by either dominating the local market (most of the richest people in China now lead domestically-focused consumer goods, real estate or Internet companies), or assembling PCs, phones, components, tablets, printers or other gadgets designed by overseas firms.
Even so, the drooping real-estate market, combined with declining demand for Chinese exports in Europe and elsewhere, pulled back China's economy to an 8.1% pace in the first quarter of 2012, the slowest growth since the spring of 2009, when the world was in recession.
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