Impressions of China from my late September trip

Every time I visit China, it is almost a new place with brand new cities and impressive infrastructure. No wonder China consumes about half of the world's steel.

Before my trip, I was convinced that China's real estate market is a gigantic bubble. After the trip, my view is a little nuanced. Chinese real estate buyers have very different motives and behaviors. Here are my general impressions:

1. They tend to buy Apt. in Beijing and Shanghai because it is a show of status, some can hide their properties from their peers better and Beijing and Shanghai have much better public service (transportation), better infrastructure (better quality of water), etc. The real estate prices in Shanghai (which I like better) are still lower than Hong Kong.
2. It is the new apt. buildings that command premium prices. Some older buildings were not quite as crazy.
3. In the second tier cities. The prices are much more reasonable.
4. There is no real estate taxes. Holding real estate has very little carrying cost. The price to rent ratio is very high in Beijing and Shanghai. I think the ratio is pretty high in NY if you take out the high taxes and maintenance cost.
5. The economy and people's income are growing rapidly.
6. The inflation is high. Real estate investment is viewed as a great hedge against inflation and a great alternative to stocks.
7. There are many empty apartments. I do believe they are concentrated in large cities, especially in Beijing and Shanghai. This is understandable because this is the first time in history that people in China start to own investment properties. There are many investment properties in the advance nations as well, but they are more spread out. In the U.S., people have investment properties in large cities and in more scenic places in FL, Jersey Shores, Lake Tahoe etc.It would be helpful to
8. The Chinese public sector is much larger as a percentage of GDP and the government has much greater control over its economy than the U.S. The government does not want to see the real estate slowing down, but not crashing. The power of the government cannot be underestimated. Just look the banking sector here since March 2009!
9. I was generally impressed with the people I met in China. They tend to work much harder than the people here. There is a lot of momentum behind the Chinese economy, which is still an emerging economy and is still going through urbanization. That is not going to change in the short term.

10. The pollution seems much better controlled in Beijing and Shanghai now than before. I saw blue skies in both Shanghai and Beijing! Here is a picture of streets of Shanghai.