Eastern China Headed for Real-Estate Bubble, Partners Group Says
China is heading for a real-estate bubble beginning in the east of the country, according to Partners Group Holding AG, a Swiss money manager that has $600 million invested in the country.
The Chinese government, which has taken steps to cool the market, may not be able to prevent a drop in commercial and residential property prices, the Baar, Switzerland-based company said in a report published today.
Investors in China have speculated on a housing boom as prices rallied, shunning other asset classes such as gold, according to the report sent to Partners clients. A burst bubble would be “painful” for homeowners, Partners said.
“We see potential for a correction in China’s real-estate sector, so we’re avoiding the eastern cities,” said Marcel Erni, founding partner and chief investment officer at Partners Group, in an e-mail to Bloomberg News on Jan. 28. “There appears to be a ‘trees will grow to the sky’ belief in future apartment prices,” the report said.
China’s government has already toughened down-payment requirements for people buying real estate. That’s had a “questionable effect,” as most investors can afford large deposits, Partners said in the report.
China has taken other steps to cool its economy, including raising interest rates and increasing capital-reserve ratio requirements for domestic banks. The government wants to prevent a record $2.7 trillion of credit extended in the past two years from inflating asset bubbles.
Partners Group reported worldwide assets under management of 21.4 billion euros ($29.2 billion) on Dec. 31 and said it plans to win as much as 5 billion euros of new money this year.
To contact the reporter on this story: Giles Broom in Zurich at gbroom@bloomberg.net.
To contact the editor responsible for this story: David Merritt at dmerritt1@bloomberg.net.
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