Property prices in Shanghai and Hong Kong have risen so high due to speculative demand that they are due for a fall, says investment guru Jim Rogers.
China has hiked interest rates and reserve requirements to cool its economy, but property prices in 70 cities across China rose 7.8 percent in December, the fastest pace in 18 months, according to Bloomberg.
The problem with China, Rogers says, is that it's hard to take money out of the country, which led to speculative investment in real estate.
“So all of the money that stays in China, it builds up and it has to go somewhere. So you have many prices going higher than they would otherwise, even higher than in America.”
“Certainly, Shanghai real estate or Hong Kong real estate should decline,” Rogers tells Bloomberg.
“My goodness, if anything’s in a bubble in the world, that and U.S. government bonds are certainly very overpriced.”
Aside from Shanghai and Hong Kong real estate sectors, the rest of the Chinese economy is not producing any bubbles, Rogers adds.
Of the world's largest economies, China has rebounded from the global financial crisis the quickest, with real gross domestic product growing by more than 10 percent in the fourth quarter of 2009, The Economist says.
The China Banking Regulatory Commission recently said banks should be more cautious with their lending, particularly with the property sector, according to Reuters.
“Banks should pay high attention to the changes in the property market and strictly implement relevant credit policies to enhance supervision and window guidance of property loans,” the commission says.
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