Xinjuan Real Estate (XIN) has provided big gains over the past few months, but investors need to keep an eye towards unsustainable macroeconomic developments in China’s real estate market.
Xinjuan Real Estate Co. [[XIN]] is up more than 50% this year – fueled by incredible gains in the Chinese residential real estate market – but the very same real estate boom could eventually be the shares undoing.
According to China’s National Bureau of Statistics, property sales across all sectors were up more than 60% since the first of the year compared to the same period of 2008 while sales of homes were up even more, 65% compared to 2008.
The Chinese government is taking steps, such as U.S.-like tax breaks for buyers of their first home, to avoid a real estate crash when the furious buying necessary cools, but as the U.S. real estate market demonstrated, an inflated real estate market can only be propped-up for so long.
Xinjuan Real Estate is a developer of large and small scale residential properties as well as a property management service provider. It is certainly not alone in its direct exposure to the Chinese residential real estate market, but it certainly is the most prominent direct casualty of a real estate crash that is traded on a U.S. exchange.
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