It is not news that someone predict the drop (serious drop) in real estate price. This oppinion was strong three years ago, and is still strong today. The reality, however, is just on the opposite part.
Today, when Wendy and I walked around the neiboughood, and past the Sales Office. Out of curious, we stepped in and was astonished by the current price of real estates.
Wendy and I bought the current apartment in 2003. At that time, the price as 5900 RMB per sq. meter.
Today, when we asked the price at the same location (just the other side of the road), it turned out it is already 18,000 RMB per sq. meter. If we consider the price of 3000-4000 sq. meter in early 2003, that is 3 – 4 times increase in 4 years.
For good quality aparments, the “reasonable” price already raised to 20,000 – 30,000 RMB per sq. meter. This high price was only seen in the houses along the Huang Pu River at the Lujiazui area 5 years ago. Now, it is common price.
I am very confused, and the price seems keep going up dramatically.
Now that’s what I call a crazy real estate bubble. Many cities in the US had experienced similar bubbles and then they all burst within the past year or so. Now Sellers are begging to find Buyers in many areas.
Are banks and lenders mainly doing a lot of Adjustable Rate Mortage loans (ARMs) in Shanghai which allow the mortgage lender to adjust/change the Borrower’s interest rate after 3 to 5 years?
Shrek7: The main reasons behind the housing bubbles in the United States and China are mostly not the same.
In China, drive force for the insane real estate prices (and stock prices as well) is the lack of other investment options available to the ordinary Chinese. They can put their money in the bank for 2% interest, or buy an apartment (or stocks) and get 50%+ returns.
In the United States, the Federal Reserve loosened money supply after the dot-com bubble, along with loosened lending standards, a lot more people could afford to buy a house. Houses start to appreciate in value.
In both cases, people see their neighbors make some money, so more and more people buy real estate. And a bubble is born.
At least this is not as bad as the Dutch Tulip Bubble.
Also, since there credit is not as easy as in America few years ago, people might lose their past earnings, but not future ones.
I think the main drive for apartments is still not speculation, but just the fact that best level of live and best jobs are in Shanghai, so coming here makes lots of economic sense (compare it to capital investment that pays off in 10 years…).
also something to notice: the government get almost 10% of the tax for each transaction from the seller alone.
the world is not crazy, Shanghai is :-)
Илия: I know it’s hard to see a bubble from the middle of it. There are always talks of “It’s different this time.” Trust me, it’s a bubble.
The government imposed the transaction tax on real estate (and stocks) as an attempt to cool the market. The government thinks there is a bubble too.
That’s insane. But the Chinese love to gamble with real estates, so, it’s no surprise the prices have quadrupled since your time of purchase. Plus, Hong Kongers are probably another reason why there is the bubble. It will self correct eventually, look at HK. I’ll just wait til then to get into the market.
Indeed, what bubble? Residential real estate prices in Moscow are $5000/sq meter. They doubled in 1 year.
No doubt about it, Shanghai is much crazier than the US was. US price has come down since a year ago.
Hi Jianshuo, it is possible to buy a unit in one of the old apartment buildings in the French concession? In one of your post, you said that the old apartment building near the old French Club remains. Is it still a residential building? What is the name and address? Thanks!
Currently, it is very hard, almost impossible to buy an old apartment in the French Concession. The control is now very tight. The Old French Club is near the Maoming Road (茂名路), and Changle Road (长乐路).
Rental usually includes the management fee and clubhouse fees though it is still necessary to confirm with the landlord.
Fees except Rental
Usually including parking fee, water, electricity, gas, satellite TV fee, internet access fee, phone call.
Typically 1 to 3 month’s rental.
Who will pay the agencies the commission fee?
Property developers or property management companies or individual owners. Usually, the tenant doesn’t need to pay the agency any commission fee.
If making money was the only goal back in 2003, one should have done one thing only: Buying couple of apartments and holding them till today. Where could you find better way to make money in China?
I just found this topic today. Jianshuo’s post was dated back to July 2007. Then we take a look how much an apartment cost to buy in today. The apartment Jianshuo mentioned may cost RMB 30000 per sqm. And Jianshuo may regret that he did not buy it that time:) In fact, everyboday in Shanghai maybe other cities as well regret that they did not buy an apartment, those bought already regret they did not buy more. Noboday knows why, huge demand? but since it is so expensive, who is buying??
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It is a bubble and it will pop. The higher it goes, the more spectacularly it will pop. Look at US real-estate. Unstainable. It has popped. Prices in California have already lost 40%. Even New York Manhatten is flattened and is coming down. The Shanghai Stock Index has lost 60%!!!!!!!! Japan’s stock index was at 40,000 in the 1980’s, but is still at 12000 now!
There will still be money made as long as the bubble continues, but when it pops, you just need to may sure you’re not the last person holding the assets.
Whenever you hear someone saying “it’s different this time” or “it’s a new paradigm”, you should immediately run as far away from that person as possible.