"First, I don't see credit issues being a problem for them... "
OK. Let's see.... The chinese stock market is off 70% from it's highs. Real estate values have crashed and there is talk of major property companies/developers going out of business. They have cut interest rates, reduced bank reserve requirements, and encouraged consolidation in a variety of industries including banking...
Well, I guess you are right, there are no credit issues. Silly me.
China facing property crisis as prices fall and transactions plummet
TUESDAY, 16 SEPTEMBER 2008
China facing a property crisis The average prices of residential and commercial real estate in China are falling, having peaked earlier this year and the number of transactions have plunged, according to industry observers.
This downturn comes as the growth rate of Chinese exports has slowed and stock markets have plummeted. The confluence of events has resulted in what economists describe as a deceleration in China's economic growth, although at nearly 10% it remains the envy of many nations.
Brokers say that sales volumes first dropped precipitously in southeastern China, and then the decline spread across the country. Faced with few buyers, sellers started cutting their prices for residential and commercial real estate.
In some areas prices have dropped by 10 to 40%. In other parts of the country transactions have fallen but prices have only started to follow. For instance, the number of home sales has plunged by two-thirds in Harbin in the northeast, though prices are down as little as 4% from the same period last year.
'People are thinking more carefully and taking much longer before they decide to buy or not to buy property,' said Hwang Sha, a real estate broker in Xiamen in east-central China.
Cities deep in China's interior are least affected. Dan Yian, a real estate agent in Chongqing, the largest city in southwestern China, said that the volume of housing transactions there had slowed by 20 to 30% so far this year. But prices have not yet fallen from a stable level of $730 a square metre.
Export-dependent coastal cities in mainland China have had the steepest downturns in their real estate markets. Freddy Wu, the chief executive of Hong Kong Property Services, said his real estate agency had seen mainland investors default in recent months on a tenth of their purchases of Hong Kong apartments, forfeiting the down payments that they made.
'A lot of investors from China have their cash tied up in the mainland stock market and in mainland real estate, so they would rather take a loss now instead of being forced to sell mainland investments at a loss to come up with the cash to complete purchases in Hong Kong,' Wu said.
But unlike the subprime meltdown in the US, and the resulting credit crisis, weaknesses in China's real estate market do not at this point appear to pose a threat to the vitality or stability of the financial system.