Chinese Bubble Bath

The time has come for yet another housing collapse of a leading world economy. Just like Japan and the U.S., China is ready to have a real estate collapse of huge proportions. Although there is large underlying demand in the country, housing prices are racing to new heights every day, creating a bubble that not even Chinese demand can keep up with. Many people are saying that the rising prices in China are from urbanization and rising incomes, but with interest rates so low housing prices have more than quadrupled in the last five years! Second-time home buyers now have to put down a minimum down payment of 40%, an inconcievable number in many countries. This begs the question that many investors in the U.S. said during their own housing crisis: when should I short the Chinese housing market? The answer is not clear, but it is easy to see that housing prices likely will not drop until interest rates in China begin to rise or demand begins to fall. There is no specific time frame for such activity, but keep your eye on housing prices in China because there is massive potential for this looming crash.