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China Real Estate. Newsweek Says It's All Good.

By Dan Harris and Steve Dickinson

One of the advantages to living in a city without a decent newspaper is that until only a few weeks ago, virtually every article on local real estate would quote a local realtor talking about how the market is fine and how now is the time to buy a house. As a homeowner, reading those articles always made me feel a little bit better. Lately though, even our two local papers are starting to catch on. Newsweek is apparently a bit slower as it just came out with an article with all of the requisite quotes from realtors telling us how China is different and why real estate will always be a great investment in China. The article is entitled, "Great Expectations," and subtitled, "Real estate around the world may be on the skids, but China's homeowners are feeling little pain." One of the best things that ever happened to me occurred during my first year of legal practice. I worked on a massive case representing the FDIC in trying to figure out who was liable for the collapse of Oak Lawn Savings bank, the fourth largest savings and loan in the country. As part of the investigation, I must have deposed at least twenty of Illinois' top real estate developers, and of those twenty, probably eighteen of them had gone under. And of those eighteen, probably fifteen were truly experts in real estates. They had gone under simply because nobody could have predicted interest rates would spike to 20%. I learned one very important lesson from that case: there are no sure things. The corollary of that is that real estate is not a sure thing and that what goes up can come down. I am not going to make any long term predictions regarding China real estate as that would take a far better grasp of economics, sociology, and demographics than I can muster, but I would urge anyone thinking of buying real estate in China to base their decision on more than just the assessments of self-interested realtors and developers. For a more realistic assessment on China's housing market, check out this Economic Observer article, entitled, "Wind Knocked out of China's Housing Prices."

Full post as published by China Law Blog on October 13, 2008 (boomark / email).