Wednesday, January 12, 2011

Real estate in Shanghai: still going crazy

P1020035Shanghai 2010 by Fantake via Flickr
Over the past year you could have thought - when reading the media - that the efforts of the central government to cool down the real estate industry in China could have been mildly successful. Chinese media tend to report what is politically useful and lazy foreign correspondents tend to copy these wrong signals.
During my recent visit to Shanghai I was set strait again. Real estate in Shanghai is booming like crazy. Not only in Xujiahui (I stayed in the Zhoujiabanglu area), but also outside the city proper. We took a trip along the new no.9 subway line and the amount of land being prepared for residential property was just amazing.
Many of the subway stations could not offer a lot, but building activities were like crazy. At the Dongjing station, we could not score even a breakfest, but the parking lot was stuffed with cars from Zhejiang province, using line 9 to enter the city. The amazing number of huge, European style villas - sometimes next to industrial parks - was mindboggling.
Local governments have to continue land development, regardless of the financial constraints the central government can think off: that is their way to make a living. As long as local governments have no alternative taxes to survive financially, real estate is their only way to survive. And it does not look like the central governments to going to change the way local governments run their business very fundamentally.
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