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At current China market prices, the monthly cost of owning a home is not competitive compared to the monthly cost of renting a home.
This has been the case for the last 10 years.

Of course, one can argue that the hope of capital appreciation balances that... I did not think so & have been renting for 10 years!
Of course, in hindsight, I was wrong!

Does 20% inflation change my analysis? Let's see:
From today's newspaper, I can borrow RMB at 7.58% FIXED rate for 15-20 years.
Apparently, IF really inflation goes to 20% I will repay my loan with 12.42% cheaper money (compounded for every year that inflation remains that high). Looks pretty good, but is it going to turn out as promised?

How long will China tolerate 20% inflation?
Hummmm, NOT LONG! They have two ways to fight it:

1- Raise interest rates & limit the availability of credit.
This would have an immediate effect on the value of my property: it will go down... Not good. (financing more expensive & scarce will not help the market!)

2- Re-evaluation of the CNY - that will stop inflation AND have me repay my loan with MORE EXPENSIVE currency... Not good.

So far, the trend has been a slow and progressive appreciation of the RMB (against USD) and a tightening of the availability of credit together with a slight increase of interest rates to curb inflation. (that brought the stock market down!)

I think the next move could be a brutal re-evaluation of the RMB to maybe 5 RMB against USD. This could happen after the Olympics, say on October 1st...

'TongZheMen Hao - TongZheMen QiFu Ni'

I may be wrong (again), but I think I will keep renting, leave the "greater fool" games to the locals & hedge inflation with gold...

<---- renting for years too and will never buy in China.


Finally someone that agrees with me

cheers

Iso

Hey I've been renting for years too but I also know that if I had purchased when I first arrived in Dalian I might of made a mint in reselling...

BUT I WAS BROKE...

So inflation or not. Now I rent.. again...

Surely in a city like Dalian with low salaries comparatively the balloon must be close to bursting in the housing market. 8 - 10,000 plus per m2 for a normal type of apartment which makes an average one of 80m2 640,000 - 800,000rmb in the city. That's a hefty price to pay with loan repayments being what they are. Some people say after the famous olympics prices will level off and in some cases go down but hey, can you believe this. In my experience prices never go back down for all sorts of reasons or you end up with all sorts of problems like negative equity. Time will tell

isomorph wrote:

QUOTE:
Yes I am really Swiss.

And we [the Swiss] sold all our gold because it is useless. (...)

And so did Gordon Brown when Governor of the BOE, at the lowest price of 256$ per ounce, in 1999 or 2000!
He lives to regret it, but why would he care, he is now Prime Minister...

And the Italian central bank that gambled - and lost - the Italian Nation's gold in the hands of Long Term Capital Management in 1998.

Central banks used to hold Gold to back the currency and/or be able to face the next crisis...

Not much has changed, Gold is still an asset that is always in demand - unlike paper assets, as we have seen recently - there is always a market that will liquidate gold.

The only difference is, private individuals now need to hold their own stock of monetary metal. Central bankers and government leaders gave up holding it for you long ago.

Gold is money, in spite of your government lies!
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isomorph wrote:

QUOTE:
Gold protects what?
I can not eat gold, I can not produce anything with Gold (except nice looking jewellery) So how does gold exactly protect my wealth?

@ Iso,

Sorry it took so long to answer your question; please let me refer you to these two articles that will give you opposite views on Gold & Currency.
As you will see, they both make sense - people are split!

This first article says that Gold is useless, so it is useless!?
WHAT USE IS GOLD? by Gerry Hiles June 7, 2007 http://www.financialsense.com/fsu/editorials/2007/0607.html

This one says that Gold is useless and that is precisely why it is useful!?
WHAT GOOD IS GOLD? No good at all. by Eric Andrews October 20, 2007 http://www.financialsense.com/fsu/editorials/2007/1020.html

As you said earlier, money is a "funny thing"!

Hope that helps.
G-man
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