Wednesday, October 03 09:06:04
Guo is not entirely unusual in that he owns a number of apartments and his biggest fears relate to the value of these homes and the danger of a bubble about to burst in China.
Urban housing stock made up 41 percent of Chinese household wealth in 2011, compared with 26 percent in the United States, according to Nicholas Lardy, a senior fellow at the Peterson Institute for International Economics.
Guo lives in a compound a half-hour from downtown Beijing. He also owns a second apartment to the north, a third place near the site of the 2008 Olympics and a fourth home close to the Forbidden City that was given to him by his parents.
Guo gestured to the wall behind his couch. His neighbour? He owns six apartments in this compound alone. Guo's friends, too, all own at least two homes each. "There is definitely a bubble," said Guo, whose homes have tripled in value in roughly a decade. As home prices have skyrocketed, many Chinese households have gone all in on real estate by pouring years of savings into buying as many homes as they can.
But as the country's economy slows to its worst pace in years, China's dependence on real estate for growth - it's a bigger driver than even exports now - has put the government in a tough position. Allow prices to continue rising and help the economy in the near-term, but the real estate bubble gets worse. Cool things off and the entire economy slackens too much. The nightmare scenario, though, is a bubble that bursts. A major drop in prices would ripple through the Chinese economy and potentially the rest of the world. Real estate investment constituted 13 percent of the country's gross domestic product last year. The sector feeds steel, concrete and dozens of other industries. A downturn would also be devastating to the wealth of Chinese households.