Housing: Will the roof blow off?

Updated: 2013-04-12 10:26

By Michael Barris (China Daily)

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 Housing: Will the roof blow off?

A woman looks at a model of a property project on Thursday in Kunming, Yunnan province. Chinese authorities have taken a series of measures to cool down the real estate market. Lin Yiguang / Xinhua

Despite efforts to stabilize property prices, critics are talking about the possibility of a real-estate bubble popping, reports Michael Barris from New York.

It was a doomsday warning: China would face "disaster", including mass social unrest, if its overheating property market crashed.

Those were the words of Wang Shi, head of Vanke, China's largest residential real estate development company, in an interview with CBS News' 60 Minutes last month.

"If that bubble breaks, then maybe, who knows what will happen?" asked Wang, Vanke's chairman and founder.

The 60 Minutes television report on March 3 included shots of "ghost cities" - "miles and miles and miles" of neighborhoods with vacant apartment towers, condominiums and subdivisions - owned by people who have "sunk every last penny" into the Chinese property market to capitalize on surging property prices.

Noting that thousands of low-wage earners migrating to cities from rural areas ostensibly could fill these units but can't afford the $50,000 to $60,000 cost, the report suggested that China is headed for catastrophe by creating "the largest housing bubble in history."

Notwithstanding some viewers' complaints that the 60 Minutes report exaggerated the bubble's size, there is reason to be concerned about the housing market in the world's second-largest economy.

Real estate accounts for about one-fifth of Chinese investment, and investment drives more than half of national economic growth.

A slowdown in Chinese real estate could even more adversely affect countries that sell to China's property and construction industry, as well as those that export to countries exposed to the China housing market.

"If the national real estate market collapses in China, it would be disastrous, not just for China but for the entire world economy," wrote Washington Post columnist Max Fisher. A collapse would risk a "third wave