China's housing market is set for a hard landing - The Term Sheet: Fortune's deals blog Term Sheet
Get ready for the Japan-Style depression in China with a rapidly aging population, all this while China is still a low-income 3rd world country.
China's housing market is set for a hard landing
By Shawn Tully, senior editor-at-large January 23, 2012: 5:00 AM ET
The numbers are grim: China's property bubble is heading for a spectacular burst, and its effect on the country's economy will be widespread.
FORTUNE -- The Chinese government's announcement last week that growth for 2011 slowed only slightly to a still impressive 9.2% was greeted enthusiastically by the world's stock markets. Investors also remain buoyant on China's future. They appear to be buying the official line that the gigantic property price bubble is gradually and smoothly deflating, posing little risk to an engine that's so crucial to the future of global trade.
But the math tells a different story. The housing frenzy has driven prices so high, so fast, that a crash on the scale of the real estate collapse in Japan in the 1990s is a virtual certainty. And China's already exaggerated official growth rate could take a pounding, all the way to the zone of the unthinkable, into the low single-digits.
As Aliber puts it, "In China, the housing boom is a far bigger source of growth than is widely recognized, and it's totally unsustainable."
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Aliber got his first clue that the craze spelled disaster from a former student living in Beijing. The young Chicago alumnus told Aliber that he'd just moved into an apartment building with several hundred units, and was the only one living there. Investors had bought all the other apartments that hadn't sold.
Get ready for the Japan-Style depression in China with a rapidly aging population, all this while China is still a low-income 3rd world country.


