Is all this talk by international experts about China's bloated real estate market just talk -- and not reality?
Business China, an online publication with satellite offices in Guangzhou, Shanghai and Beijing, raises that question - especially after noting a continuing heavy inflow of foreign capital into China's real estate markets.
Business China reports foreign capital actually used in May rose 13.43% year-on-year to $9.23 billion and foreign investments in real estate surged 57.3% y-o-y in the first 5 months to RMB 26.6 billion, according to Ministry of Commerce data.
That compares with only a 4.6% growth in domestic bank loans for the same 5-month period, which totaled RMB 580.3 billion, according to the official data.
Chinese developers received 39% of their funding from foreign investment in the first quarter of this year, compared to 25% for full-2010. Funds from bank loans dropped to 37% of total funding in Q1, according to the China Securities Journal, which cited data from E-Commercial China, a leading domestic provider of commercial real estate services.
At least $3 billion worth of financing from overseas markets made its way to Chinese developers in the January-March period, the China Securities Journal reported on Thursday, without giving the source of the data.
According to a recent report by CB Richard Ellis, foreign funds (including Hong Kong and Macao) accounted for RMB 44 billion of the RMB 92 billion spent on acquisitions in the domestic property sector last year, up 94% from 2009.
About 23% of last year's foreign investment in China went into the real estate market, the State Administration of Foreign Exchange said in its 2010 annual report released last week.
Business China notes the Chinese property market "has been hit with a series of downgrades by foreign financial services firms in the past couple of months."
In April, credit rating firm Moody's said in a report that property developers accounted for 60% of the Chinese companies whose outlook was cut to "negative" in Q1, and that China's residential home sales could drop by 30% on the housing curbs currently taking effect in China's top-level cities.
Two weeks ago, Standard & Poor's cut the outlook of Chinese developers to "negative" from "stable" on concerns that tightened credit and continuing government property measures would cause a 10% drop in new home prices in the following months of this year.
S&P also said further rating downgrades would occur in the next year if the trend continues.
U.S. investment bank Morgan Stanley sided with the credit rating companies, saying in a report that it expects home prices in China's key cities to "further decline" in Q3.
Jim Chanos, the U.S. hedge fund manager who predicted Enron Corp.'s collapse in 2001, previously stated a housing crash will take place in China at some undetermined point.
Business China reports that for some local market watchers, the supposedly negative picture of China's property market being painted by international financial firms during the growing inbound rush of foreign capital, says a lot about those institutions' real intentions."
"Sending a false alarm is an old trick played by foreign institutions. What they really want is domestic investors and speculators to panic and cash out of the market, and when property prices plummet, they will step in instead," the China Securities Journal quoted an unnamed economist from Fudan University as saying.
In 2002, foreign institutions had repeatedly predicted a financial crisis would happen due to China's banking system, but at the same time foreign banks spared no efforts to enter the Chinese banking sector as strategic investors, the China Securities Journal, an official newspaper, said.
Morgan Stanley, which in 2004 said China's property market was filled with bubbles, "ventured out to snap up properties in Shanghai and Beijing at the same time its economists voiced concerns over the property sector," Business China reports.
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