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China Real Estate Officially Enters the Bubble Phase

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After months and months of prognostications and analysis, China's property market has finally entered the bubble phase. At least that's the takeaway from a chart comparing the percent of China's gross domestic product (GDP) that investment in residential property now accounts for.

The chart below, via Bloomberg, shows that China's residential real estate market now accounts for 6.1 percent of GDP. Why is that significant? It's precisely the level residential real estate as a percent of GDP reached in the U.S. before the property market here crashed.

Of course, as shown on the chart in red, the property market in Japan in the bubblicious 1970s reached a height of more than 8 percent of GDP. According to a Bloomberg interview with Shen Minggao, Citigroup's China research head, a 10 percent decline in Chinese property investment would translate to a full percentage point decline in nominal GDP.

POSITION:  No positions in stocks mentioned.