The Real Deal Los Angeles

China’s richest man warns the country is facing a RE bubble

Wang Jianlin says prices are rising in Chinese cities but dropping in smaller towns

September 29, 2016 04:00PM

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From the New York website: Wang Jianlin — who built a massive fortune developing real estate in China — says the market is now facing the “biggest bubble in history.”

Jianlin, who is the country’s richest man, says the problem is that prices are continuing to rise in cities like Shanghai, but are dropping in thousands of smaller cities where there are vast numbers of vacant properties.

“I don’t see a good solution to this problem,” the Dalian Wanda Group chairman said in an interview with CNN Money. “The government has come up with all sorts of measures — limiting purchase or credit — but none have worked.” He’s not worried of a sudden collapse in economic growth.

China’s economy is slowing and its debt levels are rapidly rising. There is an enormous amount of money tied up in the real estate market. According to Capital Economics, direct loans to the sector were 24 trillion yuan, or $3.6 trillion USD, at the end of June. Last year, millions of small investors lost their life savings when the country’s stock market tumbled.

The Chinese are some of the biggest investors of real estate in New York City and Los Angeles, seen as a safe place to park money.  In L.A., one of the biggest projects in the pipeline is the Wanda Group’s $1.2 billion One Beverly Hills project. In DTLA, Greenland USA’s $1 billion Metropolis is already under construction.

But, as The Real Deal reported earlier this month, firms based in China are also increasingly taking on risky and complex ground-up developments. August was the 24th consecutive month of net capital outflows from China, with $51 billion leaving the country after accounting for capital inflows — good news for the city’s real estate market. [CNN Money] Miriam Hall