The Great Property Bubble of China May Be Popping

I've been noticing that many think China is the new economic power house. I offer this information in contrast to that belief.

Real estate is a foundation of China's phenomenal growth record in the past two decades, and its health is crucial to China's construction, steel and cement sectors.

Real estate is also a favored investment of Chinese looking to get better returns than bank deposits pay. Local municipalities and provinces depend on rising prices for land sales as well to fund infrastructure projects. World Bank economists warned at a Beijing press briefing on Wednesday that a real-estate bubble was among the biggest economic risks China faces.

Chinese officials, facing widespread anger from ordinary citizens who can no longer afford to buy a home, have sought to slow the rise in housing prices. The unanswered question is whether the government can manage to reduce prices gradually in a way that won't undermine economic growth.

Sound familiar, Americans?

online.wsj.com...

www.thechinaexpat.com...

www.fxstreet.com...

acy! Chinese Real Estate and the Civil Unrest Powder Keg

www.taipanpublishinggroup.com...

en.wikipedia.org...

Everyone seen that from miles away.

The construction of the ghost cities and the pulling force they have on housing prices, is one of the primary contributing factors.

The unneeded forced demolition and reconstruction of parts of the old cities are also a forcing factor. Those cost are going to show up in the housing market somewhere.

reply to post by Mr Tranny


I don't know about 'everyone'. Just in relation to poster on ATS alone, it would appear MANY are under the impression that China will emerge soon as the new Economic SuperPower.

reply to post by incrediblelousminds


It's easier in China because the local governments can actually force the prices lower making them more affordable. Once prices are lower, real estate is on fire again. China has over a billion people and there are still a few hundred million people living in shacks, country houses, boxes, pods you name it.. China has a super-fast growing middle class to pander to.

In other words the only real estate market I could ever see collapsing in China would be the commercial real estate.

If the bubble pops, China's economy weakens...labor costs will become even lower. Making their exports even more attractive. Guess who still loses?

Originally posted by eldard
If the bubble pops, China's economy weakens...labor costs will become even lower. Making their exports even more attractive. Guess who still loses?

Sort of. IF one ignores that their bubble bursting would have enormous repercussions for the global economy, and would not happen in a 'bubble' as it were.

Originally posted by Rockpuck


In other words the only real estate market I could ever see collapsing in China would be the commercial real estate.

Did you read the article? That is what they are referring to.

reply to post by incrediblelousminds


Then it doesn't matter does it?

Devlopers will make a fortune as they continue building massive residential sky scrappers and suburbs the size of our metropolitan areas. They have hundreds millions of units to build and an exploding middle class. So Microsoft doesn't need a new tower built .. it's hardly anything.

The only reason it's big news in China is that any Governor who overseas a decline in economic growth is fired, and sometimes executed. Certainly it's bad news for them ., but for China it's a hiccup.

Originally posted by Rockpuck
reply to post by incrediblelousminds

 

Then it doesn't matter does it?

"Doesnt mater'? MEthinks you are trolling, and didnt read the articles provided.

If China's economy implodes due to housing speculation, it will have the same sort of consequences on the world market that the US housing bubble collapse had.

The only reason it's big news in China is that any Governor who overseas a decline in economic growth is fired, and sometimes executed. Certainly it's bad news for them ., but for China it's a hiccup.

A 'hiccup'? Did you even read the article?

China is so massive, so organized, and so involved with world economy that anything that happens to them is worth keeping track of, imo.

I don't think it is so much about the label "Economic Superpower" as it is about China's importance, period.

Originally posted by Rockpuck


The only reason it's big news in China is that any Governor who overseas a decline in economic growth is fired, and sometimes executed. Certainly it's bad news for them ., but for China it's a hiccup.

big news in china?

No, the wal street journal is from the US. In China, this sort of information is suppressed.

I can only speculate, but In my opinion this goes well beyond Chinese real estate, considering that most of China's economic growth numbers are based upon malinvestments mainly caused by credit expansion, and as the PBC continues to contract the money supply China will soon face a classic ABC, possibly including a stock market crash.

However China seems far more sound compared to other countries that practice the same forms of interventionism. Their success afterwards will depend solely on how they decide to handle the crisis.

reply to post by incrediblelousminds

If China's economy implodes due to housing speculation, it will have the same sort of consequences on the world market that the US housing bubble collapse had.

"IF" .. Big if.. What I'm saying is not "IF" the Chinese commercial property bubble burst .. it's that if it does, it won't matter. It won't effect us.

Also, it was not the US Housing market collapsing that had any effect on the World. Note this: The Housing market was a SYMPTOM to a much bigger issue .. it was the effect, not the Cause.

ultimately what caused the Housing Bubble in the US and Europe? Inflation and low intrest rates. The gov's of the World have done nothing but try to exacerbate the issue in dire attempts to reinflate another bubble. But only because it gives the apperance of economic activity in a vaccume of production.. not because it's actually needed for our economy to operate.

If anything, construction bubbles are horrible, horrible, HORRIBLE for economies. Look at Ireland, 30% of it's economy was construction .. it makes no logical sense.

A 'hiccup'? Did you even read the article?

I read your article. One economist assumptions doesn't trump another. It's speculation either way, and I for one don't agree.

Originally posted by Rockpuck
It won't effect us.

For some reason I am not as confident as you. Can you explain why you feel this way?

reply to post by incrediblelousminds


That's what I've been trying to do..

China's economy, especially their internal economy is very self reliant. It's also almost entirely Bull!@$ because the Government "makes" every number we see. Assuming China's property markets collapse, we would never know the entire scope of the issue because the Gov controls all economic resources.

But the biggest issue is that China's government is the largest developer, private development is very limited so international activity is hardly disrupted. China is also a PRODUCER .. we are not .. their material is Chinese, made in China for Chinese. The World simply isn't exposed to the Chinese market because the biggest issue in the West was debt .. debt exposure and the derivitives that were constructed around the debts. This is not an issue with China, exposure is very limited. The only news we should really care about out of China is production levels . .when Chinese production falls it will signify a slow down in consumption of Western Economies which in turn will lead to a deflationary contraction of the general economies World wide (since china produces about the same for both the entire Euro Zone and US markets)

Again .. just my opinion ..

(also sorry for spelling issues I'm on my cell)

reply to post by Rockpuck


I see. Thanks for that. Although is China not seeking to have their currency tacked with international trade through the imf?

reply to post by incrediblelousminds


No, in order to be traded via the IMF (Basket) there has to be an exchange. Currently China does not have an actual exchange of currency.. you cannot trade their Yaun on FX markets, if you have a Chinese bank account you cannot currency swap etc. The IMF Basket is the Dollar, Euro and Yen. People think our currency is fiat, but at least it's volatile to economic conditions, China's currency is simply what the government says it is.

reply to post by incrediblelousminds


lol I bet the Chinese Government will squat those empty houses themselves just to show to the world that everythings alright