Steep and sudden price reductions are being felt in real estate markets in Shanghai and across China. Indicators suggest that the 'biggest bubble of the century' may have just burst.
"For years analysts have warned of a looming real estate bubble in China, but the predicted downturn, the bursting of that bubble, never occurred -- that is, until now. In a telling scene two months ago, Shanghai property developers started slashing prices on their latest luxury condos by up to one-third. Crowds of owners who had recently bought apartments at full price converged on sales offices throughout the city, demanding refunds. Some angry investors went on a rampage, breaking windows and smashing showrooms.
International observers and critics have continually observed that China's real estate market has grown too quickly. Writing in Foreign Affairs, Patrick Chovanec, an Associate Professor at Tsignhua University suggests that "the next three months will be a watershed moment for a Chinese investor class that has been flush with cash for years but lacking a place to put it. Instead of developing a more balanced, consumer-based economy, an entire regime of Beijing technocrats -- drunk on investment-led growth -- let the real estate market run red hot for too long and, when forced to act, lacked the credibility to cool the sector down. That failure threatens to undermine the country's continued economic rise."
Thanks to Cate Miller
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