Wednesday, July 15, 2009

The bubble is back in Beijing

Just wait, the bubble will be back in London. A wall of liquidity from the Bank of England, coupled with zero interest rates - that should do the trick....

From Moneyweek.....

"Beijing has prescribed a strong remedy" for the Chinese economy by flooding it with money, says Wei Gu on Since lending restrictions were removed in November, outstanding loans are up 30% year on year.

This flood of money has buoyed asset prices: the Shanghai stockmarket is up 69% since the start of the year, while investors are now returning to the property market after the government clamped down on an emerging bubble there in 2007. Today, "long queues increasingly form whenever new apartments go on sale" in cities such as Shanghai and Shenzhen.

After a tough 2008, "the worst is over for the residential property market", says Feng Zhi Wei of Standard Chartered. Sales volumes are up, while prices have stabilised. Even in a downturn, buyers have been willing to re-enter the market now that costs have fallen far enough to be attractive. But don't bank on a rapid price rebound. "Buyers – especially at the mass to mid-end – are mostly price sensitive and are likely to hold their purchases if house prices fall outside their affordability levels again."


  1. You say "the bubble will be back in London", Alice. So should I read into that you don't think it'll be the case elsewhere in the UK?

  2. There is a HUGE difference between Chinese consumers and British: the Chinese have massive personal savings; Brits are broke-ass at historical levels. There will be no capability to jump back in to the housing market.