Thursday, April 26, 2007

From A Boiling Pot To A Frying Wok

A news report just out said that home sales in Beijing nosedived in the first three months as hundreds of thousands of investors shifted from property investing and speculation to chase quick gains in the China share market.
National Bureau of Statistics figures show that sales of completed residential properties in the capital dropped almost 60 percent year on year to 615,000 square meters during the first quarter.

Presales of uncompleted flats also slumped more than 40 percent to nearly 1.8 million sqm in the same period. This bit of news would tie in nicely with the huge number of new share trading accounts being opened so far this. Surprisingly, despite all that, the National Development and Reform Commission released figures showing home prices in Beijing increased 9.9 percent in the first quarter. While home prices in Guangzhou were up less than 10 percent in the first quarter, while apartment prices in Shenzhen jumped more than 10 percent amid a dearth of new supply. Average housing prices in the two cities climbed 20 percent last year.

There have been fiscal measures introduced to try to curb the property bubble. In February a land appreciation tax was introduced, plus better regulation and policing of foreign purchases: both seem to have the desired effect. Investors are finally convinced that there will be more fiscal curbs to come for property, adding fuel to the switch to stocks.

Looks like a substantial amount of the sharp property gains in 2006 and in 1Q2007 are now being leveraged to play the sharemarket. Seems like however you cut it, it does not paint a pretty picture, but small fortunes can be made before the fat lady opens her mouth. I believe the bulk of the players know that as well, and even know they are playing musical chairs as well - so everyone is watching everyone and you don't want to be there when they all rush for the door.

The figures would placate the government officials somewhat on the property side. Now they have a bigger problem brewing suddenly in the sharemarket. How to let some steam off boiling kettle without scalding your fingers? Its tough to be at the top.

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