02/21 Thoughts On “China Risks the Next Property”
Hi Michael, I guess my point was that you’re not going to see the leverage-unwinding effect that you saw in the States. Most people need a house to live in and, if they own it, they have little reason to walk away. There are a couple of caveats:
First: I don’t know the effect on absent landlords. Many people buy real estate estate here because, like the U.S. in the 1970′s, it is an inflation hedge. I doubt existing owners would simply walk, but demand from this source would likely dry up, affecting prices.
Second: Commercial real estate seems to be overdeveloped. People will stay in their house because that’s where they live. I don’t know how much this applies to the rest of the country, but where I live there are several new malls that are half-empty. If this is common in other places, then commercial construction will slow down taking a toll on the economy.