Chinese property investors are weird

This could have implications here if they start buying into new condominium launches here.

It seems they buy new properties, and then leave them unoccupied, eschewing rental income. Why?

The explanation, according to a Tsinghua University economist, Patrick Chovanec – corroborated by locals – is that Chinese people regard apartments as they would cars: brand new is good and top price; used is bad and lower price.

Apparently, the moment someone moves into a property, its price falls, because it’s no longer pristine.

So property investors have little desire or incentive to rent out their properties, because to do so would be to cut the re-sale value. Better to keep them empty in the hope that a rising market will deliver capital gains.

Which means there’s nowhere to live for those who have only the means to rent rather than buy – and large (but unquantified) numbers of homes are empty. The BBC’s Robert Preston

http://www.bbc.co.uk/blogs/thereporters/robertpeston/2010/11/china_boom_or_bust_2.html

If they buy into new condo launches and leave the apartments empty, there will be a shortage of rental apartments. Mah Bow Tan will have to write more articles.

Temasek, CapLand: What abt these Chinese property charts?

Courtesy of this blog. And look at the money supply charts too.

No wonder China’s banking regulator told lenders last month to conduct a new round of stress tests to gauge the impact of residential property prices falling as much as 6o% in the hardest-hit markets. Banks were instructed to include worst-case scenarios of prices dropping 50- 60% in cities where they have risen excessively. Previous stress tests carried out in the past year assumed home-price declines of as much as 30%.

Expectations seem to be for a sharp decline in Chinese property prices over the next two years, with some, and perhaps significant, impact on Chinese banks.

Some time back it was reported that Temasek had emerged as one of the top 10 acquirers in the Greater China region,

after doing six deals worth US$1.47 billion since 2005. According to a market M&A report commissioned by Deloitte, Temasek is ranked No 9 – after Morgan Stanley and Goldman Sachs, which are No 7 and No 8 respectively. The report