($) Blogger Hits Home By Urging Boycott Of Chinese Property ($), by Andrew Browne

Soaring property prices are widening social divisions in what is already one of the most unequal societies on earth … The excesses of a real-estate industry that is focused on the top end of the market have also raised the risk of a property bubble in some big cities, from Shenzhen on the southern coast of China to Shanghai and Beijing farther north.

China’s building boom has reverberated through the global economy. Partly to fuel its pell-mell real-estate construction, China consumes vast amounts of steel, copper and cement, inflating global commodity prices. Meanwhile, its trade surpluses leave it awash in cash that state banks are all to eager to lend — further stimulating both the building and the buying of housing. And if credit weren’t enough to steer investors into housing, they face a paucity of other places for their cash, what with bank deposit rates fixed at 2.25%.

China lacks many of the detailed housing statistics common in the West, such as rates of vacancies, inventories and resale prices. The lack of data leaves prospective buyers at loss when faced with a hard sell from buyers [ed. huh?] — and may keep the developers, themselves, from sensing the extent of their overbuilding.

Investment in real estate is likely to approach 10% of gross domestic product this year. The World Bank estimates that 20% to 30% of lending by China’s big state banks goes to real estate. Serious trouble in housing could bury them in bad loans.

The central government last month announced a slew of directives aimed at forcing local governments to build more low-cost housing and at driving out speculators. For residential property held less than five years, Beijing imposed a 20% capital-gains tax on profit and a 5.5% levy on the total sales price. It also raised the minimum down payment (to 30% from 20%) and said developers must reserve 70% of new projects for smaller units. But the new rules are full of loopholes, and past efforts by Beijing to rein in prices have all failed.

The Chinese have never met a “directive” they can’t instantly get around.