Tied up today and tomorrow with a couple of real writing matters, but I wanted to get to this before it passes me by …
A few weeks ago I ran into a friend of mine who runs a very successful Shanghai residential real estate brokerage that she started five years ago. Like everyone else in Shanghai, I take a certain unhealthy interest in the value of the city’s real estate – and doubly so now that the Shanghai stock market is down more than half from its high of just over a year ago. Anecdotally, I’ve heard that property owners have begun selling to cover losses. But what, I asked, is the reality?
She smiled and told me that – so far as she’s been able to see – there’s no rush to the doors. “To be honest,” she said (as later recorded in my notebooks). “From a business standpoint, I don’t care if the market is up or down. But right now the problem is that nobody is doing anything. Everybody’s waiting to see what everyone else does.” And this uncertainty, she told me, is the most worrisome trend of all – for a home owner. “I’ve just put my place on the market.”
This conversation came to mind a few minutes ago as I read – in South China Morning Post – these chilling figures [subscriber only]:
Figures released by mainland research institute Youwin show 5.27 million square metres of new residential area was sold in the city between January and June, compared with 10.43 million sq metres last year.
Not chilling enough for you? Well, then. Consider that – just last week – the average home price in Shanghai fell 4.3% from the week before (according to the same SCMP article, citing Youwin). But most nerve-wracking of all are reports – like this one from Shanghai Daily – indicating that market price averages are being propped up by strength at the very top end of the market.
I should concede that I have no particular insight into the direction of Shanghai’s property market (despite reliable rumors that investment houses are trying to liquidate luxury properties). That said, I disagree with the latest conventional wisdom that the Olympics will have little to no effect on China’s property markets. At least in Shanghai, where buyers and sellers are very much in a waiting mode, the least shift in confidence (one way or the other) should be enough to move the market. So why not the closing ceremonies?
[For the record: I don’t believe Expo 2010 can or will replace the Olympics as a psychological economic driver for Shanghai. In fact, if it increases residential supply into the current marketplace, it might actually have a negative impact on property prices.]