An analyst has forecasted that China’s property bubble will burst in the second half of 2013 once the government stops "injecting ridiculous amounts of credit into the economy".
Gillem Tulloch, founder of Hong Kong-based research firm Forensic Asia, noted that the bubble continues to grow due to the flow of cheap money and high-end speculation and is almost at “popping point”.
This follows the announcement earlier this month of new restrictions aimed at cooling the property market. The measures include higher down payments for second-time home buyers and a new capital gains tax.
But Tulloch feels the curbs will have mixed results.
“I’ve never come across a government that’s actually managed to deflate a bubble gradually.”
A crash in China’s property market will have “a huge impact on all parts of the economy as asset prices decline and people’s savings get wiped out”, he added.
For investors with an interest in Chinese property development stocks, Tulloch noted: “I would say there’s absolutely no value in any of these stocks whatsoever. The Chinese property companies have the best terms of trade in Asia and yet they’re the most highly leveraged in Asia, so when this bubble bursts they’ll all be negatively affected.”
Shabnam Muzammil, Senior Journalist at PropertyGuru, wrote this story. To contact her about this or other stories email shabnam@propertyguru.com.sg
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