Data Shows China Real Estate Weakness

There are signs of the real estate bubble bursting in China.

With 60 percent of apartments in Beijing still unsold and bank interest rates on loans soaring recently, some are concerned that the bubble is bursting.

Even under these circumstances, Koreans are increasingly investing in China’s real estate, which some point out could cause a great loss.

Sixty Percent of New Apartments in Beijing Are Unsold-

According to the data published in China’s real estate transaction network (www.bifdc.gov.cn) yesterday, 109,206 units, or 59.1 percent of apartments which were newly built were unsold as of late last month.

About 17,815 units, or 65.7 percent of apartments, which were completed and up for installment sale, were unsold.

The statistics were compiled on the instruction of China’s Construction Ministry in March to survey the supply and demand situation of each region and publicize the data on the Internet.

With the high rate of unsold apartments in Beijing being publicized, Chinese media outlets, including the online version of Xinhua News Agency, began reporting on concerns over a possible bubble burst.

Shin Bong-gil, an official at the Korean Embassy in China, said, “The Construction Ministry’s instruction to publicize the situation of installment sales of apartments online and the specific publication of unsold apartments by the Chinese media are measures to prevent the overheated real estate prices from bursting altogether, and to achieve a soft landing.”

China’s Mortgage Loans Reach 386 Trillion Won-

According to People’s Bank of China, the country’s mortgage loans reached 3.7 trillion yuan (about 368.4 trillion won) as of late last year. The amount is 153 times that of 1997 (20 billion yuan).

The skyrocketing mortgage loan total is because people can extend a loan up to 70 percent of their housing prices.

Sina, a Chinese Internet portal site, found in its survey of 15,000 Internet users that 31.8 percent of those who received a mortgage loan use more than 50 percent of their monthly salaries to pay back the loan.

Korean “Blind Investment” Reaches Alarming Levels-

However, Koreans are increasingly investing in Chinese real estate. Korea realtors doing business in China said that Koreans mainly invest in luxurious 70-to-150-pyeong apartments.

A realtor said, “There are some apartment complexes in which Koreans bought 10 to 20 percent of all the units.”

The Export-Import Bank of Korea said that Korean investment in Chinese real estate exploded from $730,000 in 2001 to $31.34 million last year. The investment reached $19.47 million in the first three months of this year alone. Considering that most individual investments are not reported, the actual investment must be a lot more.

Jong-Dae Ha orionha@donga.com