There are signs of trouble in the China's real-estate market, which has the potential to ripple across the Pacific Ocean and affect Vancouver housing prices.
Writing on the American Perspective from China blog, Patrick Chovanec suggests that "China's economy may be approaching a crisis".
Chovanec, a professor at Tsinghua University's School of Economics and Management in Beijing, adds that "one potential interpretation of this crisis is that China is entering the terminal stage of a bubble, and that what we are seeing are the early signs of a much broader collapse".
"For the past several months, China’s official media have been touting official data indicating that while most Chinese cities are still seeing housing prices rise, a growing number of cities are starting to see a plateau or even decline in prices—evidence, they say, that the central government’s cooling measures are finally working," he notes. "More significant, in my eyes, are reports — which began emerging in late August — that in several cities across China, prices in primary housing markets (developers selling to homeowners) have begun falling away from those in secondary markets (homeowners selling to other homeowners). The effected markets include not only 1st tier metropolises (Beijing, Shanghai, Guangzhou, and Shenzhen) , but also 2nd tier (Chongqing, Wuhan, Tianjin, Zhenghou) and 3rd tier (Ningbo, Foshan, Wuxi) ones as well."
Chovanec mentions that one report mentioned a price gap in Beijing and Shanghai of 20 percent. Developers are dropping the price of their product because they need cash.
In recent years, Vancouver's real-estate market has been fuelled in part by the influx of Chinese buyers. If our housing becomes less competitive and the rich in China are feeling squeezed, that could reduce the number of purchasers.
Couple that with a net decline in interprovincial migration—which was reported in the B.C. government's last fiscal update—and it could be a recipe for a housing correction.
BC’s population grew 1.1 per cent from January to March of 2011 compared to the first three months of 2010. That was caused by 7,049 people immigrating from other countries. However a net total of 98 people moved to other provinces, marking B.C.’s first net interprovincial outflow in eight years.
A housing correction would, of course, be welcomed by first-time buyers. But it's not nearly as appealing to construction workers, lenders, and developers.
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