Bursting China’s real estate bubble…

By Malini Hariharan

…is not going to be easy and the Chinese government’s attempts to control sky rocketing prices will not work unless there is a change in the local culture, a chemical industry executive confidently predicted at last week’s Apic conference in Mumbai.

I thought the executive was referring to the Chinese love for speculating in real estate. But it turned out to be something more.

Chinese families, the executive explained, are supporting the boom as they are buying houses for their children, especially sons.

“It does not matter if the boy is still studying or does not even have a girlfriend; parents are putting aside money to buy an apartment. I have surveyed all the Chinese working in my office and found that most of them have invested in a house for their children,” said the expat executive.

“You will see a lot of empty apartments in big cities; I live in a complex that has 1000 units and after 2 years only about 10% are occupied,” he added.

Pic source: www.lifeofguangzhou.com

I thought it would be good to test this theory out and asked my Chinese colleagues if it was true.

Yes, they confirmed, parents will invest in a house as it improves marriage prospects. And apparently daughters are not being neglected. “It’s a house for a son and a car for a daughter.”

And one colleague with a 5-year old son laughed and said that she is interested in investing in an apartment. “Maybe once prices come down a little”.

The froth in the Chinese real estate market is no doubt coming from speculators but there is also real demand from families keen to secure their child’s future.

Recent government measures to cool the real estate price spiral may have slowed these buyers. But they will probably be back once they sense that prices have hit the bottom and fuel the start of another boom.

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