China’s Richest Man Warns Of Biggest Housing Bubble In History

Dalian Wanda chairman Wang Jianlin believes China’s real estate sector is facing the biggest housing bubble in history and warned China’s leaders could face a similar headache in the property sector to what it had to deal with when the stock market tanked last year.

The billionaire mall developer, in an interview with CNN this week, pointed to the conflict between ever-rising home prices in China’s tier one cities, and what he said were continually declining property markets in smaller cities, creating a major challenge for mainland authorities.

“I don’t see a good solution to this problem,” China’s richest man said in the interview. “The government has come up with all sorts of measures — limiting purchases or credit — but none have worked.” Wang went on to say that China’s housing market is “the biggest bubble in history,” according to CNN.

Following a relaxation of mortgage policies and an infusion of cheap credit, home prices in Shanghai were up 31.2 percent in the 12 months ending in August, while Shenzen has recorded a 36.8 percent increase during the same time period, according to data from the National Bureau of Statistics. However, cities such as Dandong, Jinzhou and even Wang’s home turf of Dalian in Liaoning are still seeing home prices slide or remain stagnant.

While an increasing number of mainland cities have put administrative restrictions on home purchases as prices have soared in recent months, so far banks have remained eager to loan to home buyers and to developers, as Beijing blesses a rebound in real estate prices as a way to meet its overall goals for GDP growth. According to Capital Economics, direct loans to the real estate sector were nearly RMB24 trillion ($3.6 trillion) at the end of June. On the consumer side, more than 70 percent of bank loans in the country during August were home loans, according to a recent report by Reuters.

Real Talk Or Hot Air?

The property tycoon has never been shy when it comes to providing a quote, but he also has interests to protect as the world’s largest commercial real estate developer, leaving some to wonder if he was speaking out for the greater good or for the good of Wanda.

https://www.youtube.com/watch?v=TuW-E3W5uS4

During an August conference in Beijing, the chairman of Dalian Wanda Commercial Properties urged the government to encourage Chinese buyers to spend money domestically instead of heading overseas for their shopping sprees.

“Policy makers need to study this very seriously and come up with policies to curb excessive overseas consumption and pull consumers back home,” Wang was quoted as saying by Bloomberg.

Wang’s firm is the biggest mall developer in the country, and currently operates 133 Wanda Plaza shopping complexes and 51 Wanda Department stores on the mainland, with plans to expand this portfolio

Hollywood Wanda Attracting Attention

If Wang is sincere in his pessimism about China’s real estate market, it may help to explain his recent focus on buying assets in other industries.

Wang has been actively trying to diversify Wanda’s portfolio with most of his interest seemingly focused on building a global entertainment empire. In addition to having assembled the world’s largest collection of movie theatres, the former PLA officer acquired Hollywood production house Legendary Entertainment earlier this year in a deal Wanda valued at $3.5 billion.

Wang also made an ultimately unsuccessful bid to acquire a stake in Paramount Studios and is now in talks to buy Dick Clark Productions for $1 billion. These moves caught the attention of 16 members of Congress who wrote a letter warning that China could be increasing its influence in American media, something Wang dismissed in the interview.

“When Hollywood exports movies to China, they have to consider the taste of the Chinese audiences and market demands,” he explained. “They may add more Chinese elements because they come here to make money.”