China Real Estate

Fall of the prices of 30% since last summer and multiplication of the bankruptcies of real estate agencies:  lately again one of the most dynamic real estate markets to the world, Shanghai presents today the signs of a brutal slowing. And that, after years of overheating.

With the bursting of the bubble, many small owners meet strangled also by credits become too heavy. Numerous were estimated themselves yet lucky to have made part, after hours, or even of days, of tail, of the candidates to the purchase having gotten the ticket allowing them to make an offer for an apartment on plan.

The real estate in the Chinese metropolises was the subject of frantic investments these last years, especially in Shanghai, financial heart whose landscape has been transformed completely night and day by the cranes in action and the abundant manpower come from the countries in quest of use. In this flaming market, the prices of the real estate doubled in three years, until the first months of 2005.
However, before the risks of overheating, the authorities of the metropolis to the 17 millions of inhabitants took some measures last spring to slow down overinvestment and speculation:  taxes on the increment, obligation of repayment of loans before the resale, interdiction to sell before the completion of works, raising of the rates of the credit and the initial contribution.
Since June, the prices began to fall and those that had just reached for the first time the property met with debts superior to the value of their investment, explain Song Ha?, a specialist lawyer of the real estate of the Zhongxia cabinet.
So the square meter has it lowered of more than 33% in the district of Xianfeng, to about forty minutes of the center, where an apartment of 100 square meters sold itself for 500.000 yuans (62.000 dollars) has one year.
" Most investors borrowed at least 350.000 yuans from the bank, but seen the state of the market and the localization of the district, these houses are not worth more even that", explain Song Ha?, whose cabinet had about hundred business of this type to treat since June.
" Then, the new owner frequently, returns its good in the bank and waits to see that that this one can give of it to him. And well often, it is again in debt", he adds.
For the analysts, the growth of this type of indebtedness is troubling. Already in 2005, the doubtful real estate credits had represented 1.55 billion of yuans, against 558 millions yuans in 2004, according to the official statistics. " C.st a systemic risk for the banks of Shanghai", warns an economist of UBS Jonathan Anderson. According to the agency Savills China, at the end 2005 the middle prices had declined 31,9% in relation to one year earlier.
The impact is even bigger on the complex luxurious of Pudong, this district emerged of nothing from the end of the years 80, become a jungle of ultramodern buildings. " Shanghai Green City for example, on the Street of Pudong South, the prices that reached 18.000 yuans the square meter fell to 10.000 yuans" underline Yu Ying, a person responsible of the most important agency of China, Yiju.
Under the fire of the critiques for this brutal backlash, the municipal authorities retort that it was necessary to bring back a certain stability in the sector.