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The Sanya Real Estate Review: 3rd Qrtr 2009 - Lunacy Prevails - SanyaExpat founder & Investment/Real Estate Analyst Mario Cavolo Declares a Red Zone Property Market Bubble.
Many of us enjoy tropical beaches and Sanya is China's only true, genuine tropical beach destination. Over the past 3 years of development "Sanya" has become the catch-all word comprising the 160kilometer south/southeast coastline starting from the Kempinski Resort at Sanya Bay running up through Dadonghai, Yalong Bay and Haitang Bay to the Le Meridien Resort at the northern side of Shimei Bay. Over a period of four years since first arriving, Sanya has been good to us and many of our friends. I have gotten to know her intimately, in great detail, both personally and in terms of business and market research.
Today, I cannot encourage you to join the speculative fools playing the Chinese real estate and stock markets right now, including Sanya's property market. This is an ugly and unfortunate scene, with prices way too high, way too fast, even though it might continue a while longer. Less than 1 1/2 years ago a very knowledgeable local business owner and I sat over coffee discussing that prices in the area will most likely reach 20,000rmb per square meter "someday", probably two to three or five years later. Since then, prices have rocketed to over 30,000rmb psqm and higher. The cauldron of witches brew is boiling and buyers are stepping back.
Andy Xie, ex-Morgan Stanley China analyst in the U.S., has recently called the real estate and stock market rise in China a giant ponzi scheme. Strong words from a person we can rightfully call in the know. Please be sure to at least read his remarks further on down in this report. After exhaustively analyzing and watching both markets, I am grateful for the returns I've made and now I am getting very jittery at these heights, in full agreement with Mr. Xie.
"Looking more broadly beyond the real estate market, we can also sense there is a strong case of bias emerging from Chinese big business to subtly push foreigners out of China, as they come up with one big event excuse or another (Beijing Olympics, 60th National Day Anniversary, next the Shanghai World Expo) to severely limit visa permissions and make it harder to do business according to the recent scathing European Commission Annual Position Paper. The Chinese are perhaps starting to enjoy their little victory party as they seem to be the pied piper leading the world out of its economic crisis. America is cash broke. Europe is cash broke. Asia is flush with cash starting with China. That's the economic reality and in fact we should appreciate its importance and value." Mario Cavolo
Indeed, the global depressed economy is causing companies to cutback on expenses and one way to do that is to localize the expat management positions and send the expats packing as many companies have needed to do.
As I am the only person on planet earth who writes and publishes a reasonably accurate and detailed Sanya Real Estate Quarterly Report, that makes me the de facto investment real estate analyst of the moment whose job is to sometimes go out on a limb and call the bubble. There is always some possibility the bubble will continue for a few more years to even dizzier heights before it inevitably will burst. If so, it is I who am the fool today. If not, it is I the revered wizard analyst tomorrow. If prices are substantially higher in the next 2-3 years, that state of economic affairs will probably also reflect severe inflation and currency devaluation issues worldwide as the underlying financial crisis continues to unwind in ways we haven't seen yet. The unwinding of the crisis is far from over and we shall see.
Going into the background analysis of the property market here, I start by enabling you our valued and appreciated readers to understand this bubble very quickly by making you a genuine Sanya real estate apartment offer. Do take a moment to compare this sample Sanya real estate offer to other possible choices you have in China, and also compared to other possible countries in Southeast Asia, North America, Australia/New Zealand and the European Continent.
Go to the next page to view today's amazing ocean-view luxury apartment offer and judge the lunacy for yourself!
10 comments
Canada] P.S. We have met at Fat Daddy' one fine Sany' afternoon Say hello to Sheldon(thank for the only English Library in town.
I could go on, but China's real estate markets have been making fools out of analysts for 10 years already. China gets richer = property prices go up, can't put it more simpler than that.
Indeed, Sanya is the only true choice for the newly rich Chinese to own that warm weather tropical second home...I'll still differ with the view that this rise is just getting started...its getting worn...we shall see!!
Cheers, M
The widening gap between intrinsic value and market price is indeed cause for wonder!
A couple of years ago I objected (to me) that the cost of the villas at Times Coast put them in the world league. The location is great, but an international buyer could probably do much better in terms of value for money. I suppose the point is that rich Chinese can't...
There are lots of important topics in this world very few people are talking about. Very high inflation in China is one of them. The cost per square meter to decorate a new apartment has just about doubled in the past three years. Don't get me started on the cost of a liter of extra virgin olive oil! Granted, interior dcorating costs in China are still far lower than those found in the west. Cheers, M
Thank you for posting about this…
Remember that we are rarely comparing apples with apples in real estate. Today's projects are generally far higher quality than those built in Sanya 5 years ago. At least, they are better marketed, the buyers have more money and by now are used to getting the best available of pretty much everything.
Sanya is not an international market, it is a rich Chinese market. As long as rich Chinese are doing well it is fair to say that this market will do well. We may not like it, we may not agree with it but that has nothing to do with it as long as the rich Chinese do. Where else can they get this kind of place, nowhere in China. Japan they can't travel independently, Malaysia, maybe, Thailand they cannot own without a Thai national. Other markets are all too far away or too difficult (language, food etc). I say this one will run and run.
By the way, the official contest is on:
The Mario "this market is hitting a wall" vs. Sam's "this market will run and run" contest is on baby!!!!!
Cheers, M
Properties selling at twice the price are serviced apartments, fitted out to meet the exacting standards of China's newly rich and plumped up, hyped up and primed to charge a premium on the promise of everything the discerning buyer could wish for. The same people that pay Rmb3 to 5,000 for a sea view room in Yalong Bay's disappointing hotels will pay Rmb3 to 5 million for a place they can call home in China's only real year round tropical resort.
Where else do you escape to for warmth in the middle of a Liaoning or Heilongjiang winter? where else do you send your elderly parents for 3 to 4 months every winter? There are no quality serviced retirement homes in China, this is the next best thing and one way to show you care.
Bizarrely to many westerners, the higher the entry price, the longer the queue. Chinese buyers pay these prices because they can, they want to retire to Sanya themselves one day, they can get one up on the neighbours...
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