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Real Estate Tycoon Sees Titanic Moment for China’s Housing Market
China’s once buoyant property market is facing some rough sailing. In fact, according to one tycoon – Soho China Ltd0410.HK -0.32%’s chief Pan Shiyi — the real estate market is looking more like the Titanic headed in the direction of an iceberg.
“I think China’s property market is like the Titanic and it will soon hit an iceberg in front of it,” Mr. Pan told a financial forum on Friday, according to the China Business News. “After hitting the iceberg, the risks will not only be in the real estate sector. The bigger risk will be in the financial sector,” he added.
He said serious problems lie with financial products like trust and wealth management products, as well as entrusted loans that charge higher interest rates than banks and are key financing vehicles for the property sector. “When housing prices fall 20% to 30%, these problems will be all exposed,” he was quoted as saying.
The central bank has instructed commercial banks to make mortgage lending a priority. Likewise, some local governments have taken steps to ease their curbs on home purchases, which were put in place when prices seemed to be soaring out of reach for most of China’s 1.3 billion people. They’ve also eased restrictions on residency requirements and in some cases have rolled back curbs on buying a second or third home. But these measures have been relatively modest so far and Beijing has not given the market a clear signal it can go back to its old speculative ways.
Though Mr. Pan didn’t comment on the government’s moves to soften property curbs, he did say he believes many forces — including plans for a nationwide property registry, an expanded use of the property tax and more land for development as a result of rural land reform – will help drive the market lower.
“I am not optimistic about China’s property prices,” he said.
If a property specialist like Mr. Pan thinks the market is close to a Titantic moment, perhaps it’s a good idea for buyers to stay close to the life boats."
http://blogs.wsj.com/chinarealtime/2014 ... d=yahoo_hs
