China's property market braced for 30% drop

"And so it begins..." (don't you just hate that phrase sometimes?...)

Actually, it began a while ago. China's overcapacity in both residential and commercial real estate is no secret. Last year it was reported (sorry, no longer have source) that, if I'm not mistaken, there was enough empty, newly-built office space for every man, woman, and child in the nation of China to have a cubicle. All the earmarks of speculative madness have been there for those paying attention...housewives and shoe-shine boys flipping homes for profit, unsustainable parabolic price runups in certain areas, over-the-top developments sitting empty, etc. etc. Sound familar? Is there any way this will not end badly? Plus I shouldn't have to remind you of the corruption, lack of transparency, and general hijinks associated with money and statistics in China. If they are admitting its this bad, you can bet its probably uglier.

China's property market braced for 30% drop

Standard Chartered has told clients to prepare for a fall in property prices of up to 30pc in Beijing, Shanghai, Shenzen, and other large cities in China as the delayed effects of monetary tightening begin to bite.

Stephen Green, the bank's China economist, said a glut of newly built homes were hitting the market just as buyers are restrained by higher down-payments and curbs on speculation. "We believe developers will be forced to cut prices," he said.

Kenneth Rogoff, ex-chief economist for the IMF, told Bloomberg Television in Hong Kong that the denouement could prove abrupt after such a torrid boom. "You're starting to see that collapse in property and it's going to hit the banking system," he said...

...China views soaring house prices as a threat to social stability, since workers are shut out of the market. The price-to-earnings ratio is 13 in Beijing and Shanghai, four times Western levels.

Charles Dumas from Lombard Street Research said China's boom had been driven by its fiscal stimulus of 13pc of GDP, the largest ever by major country in such a short period. The boost was concentrated in 2009, with credit growth running at 25pc of GDP.

"The Chinese had nowhere to put their savings since real interest rates were negative and capital controls stopped them investing abroad, so they bought apartments," he said.

Wealthier families often hold three, four, or more properties as a hard asset to store wealth, leaving many vacant. This has disguised the scale of excess inventory. It is unclear what will happen if there is the same sort of investor flight seen already on the Shanghai bourse, which is down 55pc from its peak.

More at source:
www.telegraph.co.uk...

That is the best news i have heard..... I plan to buy a house for me and my chick in Shenzhen and if i can save 30%



you should see the empty properties over here, everywere is empty homes and offices, all new built and no-1 to fill them. Makes you wonder considering the population rate.

actually I feel a lil sorry for China.
They're next in line for an economic
crash after the US and EU.

This means a global crash is underway.

sorry China
but you should not do business with Wall Street.
They are criminals and will steal you blind.
Take it from us, we know from experience.
Cash in your chips invested in Wall Street
and get out before you lose ALL your money.


[edit on 8-7-2010 by boondock-saint]

Originally posted by boondock-saint

sorry China
but you should not do business with Wall Street.
They are criminals and will steal you blind.

Yeah, that's part of it. But China's real troubles right now weren't created by Wall Street per se. There is a ton of corruption in China, statisitics and accounting are about as transparent as a brick wall, and speculative feaver has run amok.

China's laws limit external investment so unlike the Japanese in their bubble years, they can't run around spending their large capital inflows on hotels in NYC and golf-courses in Hawaii...a smart enough policy coming on the heels of Japanese excess in that direction, but it too contained its own unintended consequences. With relatively fewer options, Chinese plowed cash into real estate. The resulting runup has been nuts. Note the line in the article from the first post: "[Real Estate P/E ratios in] Beijing and Shanghai [are] four times Western levels. " That's a pretty bubblicious piece of info there. Also, let's not forget roads to nowhere, expensive and utterly empty shopping centers and commercial sites developed based on corrupt greasing of palms at the local level...

When the tide rolls back from this beach, there will be some ugly debris revealed for sure.

There's also the current saga in Hong Kong of what would have amounted to the most expensive price ever paid for one single apartment - about USD57 million - and that sale, as well as 20 other sales in the same building, suddenly all falling through 8 months after their sales were announced.

All the deposits were listed as being placed by 20 shell companies, all manged by the same law firm. Now most of the deposit money has been returned, and an investigation being launched into the possibility of a scam to prop up prices there. Basically - announcing a record price for a sale, and that apartments are selling like hot cakes...can encourage other investors to buy in.

Though Hong Kong pretty much has its own distinct property market compared to the mainland, it still has links in a broader sense and it doesn't bode well for confidence.

There has been various measures taken by the government in China to kerb property speculation, but actually a drop in prices across the board I'm sure would be welcome by many who are now simply priced out of the market. To get married in China, you pretty much have to come up with an apartment, or commit to buying one more or less...which causes alot of stress in general I imagine.


[edit on 8-7-2010 by cloudbreak]

Originally posted by cloudbreak
To get married in China, you pretty much have to come up with an apartment, or commit to buying one more or less...which causes alot of stress in general I imagine.

Speaking of stress along those lines, don't forget that due to the one-child policy, there were numerous aborted females, and now the male-female ratio for the rising generation is out of balance, with far too many men. Even in the best of times and with a balanced gender ratio, it's not easy for lots of men to get married. Another potentially destabilizing factor to chew on.

reply to post by silent thunder


Yep there is a gender imbalance. One side-effect I think is actually causing alot of Chinese men to look further afield, namely Southeast Asia, for wives.

Just recently I recall reading a story in the Chinese press about a Vietnamese scam. A Chinese guy met the visiting Vietnamese girl, got taken with her and proposed within a couple of weeks. Soon after, the girl was 'matchmaking' all his single friends with her 'friends' back in Vietnam.

It was either 12 or 20 who all coupled up and married...then bang. One day, all 12 (or 20, can't recall the exact number) women vanished on the same day...along with missing money, some bank accounts wiped and other relative valuables missing.

meh u dont get to be the oldest civilization in contiunious operation and not have to deal with a few economic reseessions im sure they will get through it as i hope the us and canada do they may treat there people like crap but the few chinese nationals i have met have been decent people its the same story as everywhere else there government may be crazy and evil but there people are exactly that people hope they get through it but not at any one elses expense

reply to post by silent thunder


yeah threre one child policy was a decent thought but there cultural belifs kinda ended up screwing them,pretty soon there gonn have to go abrod for wifes and whatnot many males is styreotypicly good for there military but bad for population growth

Strange thing is I just read another thread were they are dropping by 30% in Vancouver also? Hmm kinda makes me wonder just a little bit.

I think I will shut the storm shutters I feel a storm coming. Something stinks.

This just goes to show that the race for wealth, in this case by 'speculating' on houses is actually over time DESTRUCTIVE on society....
I bet the Chinese Government have started to realize this , shame our lot in the UK didn't.....

Also the Price to earning s ration in the UK is about 6 to 1 currently, a little less than 13 in China but still way over what it should be..

Mark my words the UK will soon feel another downturn in the values of houses and properties... Long overdue in my humble Opinion !!!!

Regards
PurpleDOG UK