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Q: When the property bubble bursts, who will it affect most in China?
I am in my own little bubble in a small town ..... wishing and hoping that there is little affect here. at least a lot less.
I could have bought a new apt. here a year and a half ago at about 3800RMB/m2, now it is about 5-6000 and still climbing.
Beijing, Shanghai, Guangzhou, Chengdu, Xi'an, etc. etc....... at 20-30,000 and more /m2, I suspect will get hit hard, like cut in half................ what about ME and my little town?
Folks leaving the big city to go home .... what happens?
I realize sh*t flows downhill but can it be somewhat contained where it is artificially grown?
It is very difficult to predict. I am guessing most hard hit are places like I am. Tier two city with hyper inflated prices almost at the level of tier-1 cities. Any place that has ghost towns will be hit. Rural parts, not much value to loose, the people in rural areas does not strike me as property sharks so no biggie for them. I am sure life in parts of Beijing and Shanghai will continue without any severe effects. The top of the property market may see a slowdown in turnover but prices can remain.
I guess it will firstly affect the venture capital organizations that got lulled into investing untold millions of dollars into China on the premise that stable growth will occur for at least twenty or thirty years and that a substantial return on capital was guaranteed.
I agree with both previous comments, the big hit will be in property investments developers, venture capital, private equity, HK trust funds, etc - the real big players - High leveraged and full of debts.
The 'common' Shanghainese with 10+ owned houses or apartments for example and I know because few are my clients, mostly they dont leverage or either take a mortgage on their houses or apartments. So yes the drop in house prices will harm them in wealth, but no panic.
Middle Class who have invested in these smaller cities and bankrupt ghost cities that the Middle Class has invested in, it will bust in 2014/2015 fiscal year where you will see the most damage everywhere except villages in which have not invested in property, they where unaffected during the last Asian recession. This of course is speculation but every client that comes in for investment immigration have stated clearly, they are getting the hell out of dodge, they prefer to pay the American tax than have the government seize property or levy heavy taxes on them. You see, the rich are leaving, or have already received their green cards, America is lax in this area, they only have to spend 3 months out of every year in order to maintain the green card, it also ensures that they cannot claim a 2555 irs tax status, thus leaving the Middle Class to not only suffer but is the sole reason why China is doing what it is doing now, finger printing is not only for us, the foreigner, it is for them also, but China has no extridiction laws with America, or anyone for that matter so unless that changes, the green card holders will be safe, I have a feeling that America will play the give up your bank information for American's sooner or later. Either way, we are all f**ked if we plan on staying beyond 2015.
