Chinese Real Estate’s Great Leap Forward.

In Investment Returns on April 19, 2011 by CQCA

In December, the People’s Daily reported that the Chinese National Bureau of Statistics was changing its housing price calculation method. The most alarming part of the change was how the data would be collected. According to the article “[The NBS] released the draft plan on September 25, which said prices, floor areas, and sales of newly-constructed houses in 35 major cities would be based upon data from local real estate departments, instead of independent research.” Every time China’s central government allowed the local government to report on important economic data, it has usually ended in disaster.

In February, a Wall Street Journal article reported that “China’s statistics agency said it will stop publishing the country’s much-watched official index of national property prices, scrapping a set of data whose accuracy was widely questioned but which also had become a rallying point for public anger over rapidly rising housing prices.”

Conveniently, a People’s Daily article later reported that “Property prices in key cities grew slower in March [2011], and some actually declined, as the government’s measures to curb rampant real estate speculation and tightened monetary policies began to bite.”

The article goes on to say that housing prices in China’s two largest cities, Beijing and Shanghai, actually increased. It is likely that China’s property market data will reflect the central government’s conflicting policy objectives of both keeping rents down and stimulating the construction industry, instead of reflecting reality. The U.S. built houses, China is building skyscrapers. It will not end well.

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