Telegraph's Evans-Pritchard: Standard Chartered Warns of 30% Drop in Chinese Property Prices

Following up on my previous post on China's bubbly high-end real estate market, here's permanently gloomy Ambrose Evans-Pritchard of Telegraph UK, telling us that the Chinese real estate property prices in major cities are set to plunge 30%.

China's property market braced for 30pc drop
(Ambrose Evans-Pritchard, 7/6/2010 Telegraph UK)

"Standard Chartered has told clients to prepare for a fall in property prices of up to 30pc in Beijing, Shanghai, Shenzen, and other large cities in China as the delayed effects of monetary tightening begin to bite.

"Stephen Green, the bank's China economist, said a glut of newly built homes were hitting the market just as buyers are restrained by higher down-payments and curbs on speculation. "We believe developers will be forced to cut prices," he said.

"Kenneth Rogoff, ex-chief economist for the IMF, told Bloomberg Television in Hong Kong that the denouement could prove abrupt after such a torrid boom. "You're starting to see that collapse in property and it's going to hit the banking system," he said.

"The government is trying to deflate the housing market gently, mostly using tools known as "financial repression" rather than Western style rate rises. Xu Shaoshi, land minister, said sales are already dropping. "In another quarter's time or so, the property market will probably come to a full correction and prices will fall. It's hard to say to what extent they will fall," he said." [The article continues.]

I've never seen a successful soft-landing from a sugar-high bubble, resulted from highly inflated money supply.

It is also good to recall at this time my post in early January about the "Merchants of Wenzhou" selling out their investment properties in Beijing. I think these shrewed investors knew when to bail with fat profits.

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