Chinese property investors are weird

In Property on 13/11/2010 at 5:19 am

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

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.


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