The Chinese Real Estate Market
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Speculation in Chinese equity / housing markets...
High-rises in Tianjin. (Photo/Xinhua) Mercedes Benz & BMWs used to be common fixtures on the streets of Xinyi in Xuzhou city of Jiangsu province. But now that four major local property-development companies have recently gone bankrupt, the economic bubble in the area has collapsed. The entire property market is in jeapordy of collapsing as China continues to tighten its housing policies, reports the Shanghai-based First Financial Daily. The owners of the four major property firms in Xinyi — Jin Xunhua, the legal representative of Xinyi Ordos Real Estate Development Co; Liu Wenzhong, the owner of Zhongtong Real Estate Development Co; Zhang Yijiang, the owner of Forever Property Development Co; and Lu Zifei, the owner of Scenic Property Development Co — are all exiting the market.
The following video is the first of the great series on China’s ghost cities that Bloomberg is running this week. Getting China right is key to your P&L and the direction of many markets, including emerging equities and commodities . We’re grappling with who financed these cities, who is holding the paper, and how were they financed. Recall China’s massive money supply growth and credit expansion which funded the country’s stimulus after the 2007-8 financial collapse.
GMO: Something's Fishy in China By Robert Huebscher January 17, 2012 A wide gulf separates the two most prominent views regarding China’s future. Faced with slowing economic growth, one side says its leaders will deftly navigate a soft landing, while the other claims it will face an implosion similar to those that befell Japan 20 years ago and the US in 2008. Count GMO, a firm that has built its reputation on its ability to identify a bubble about to pop, in the latter camp. Edward Chancellor, who focuses on capital market research as a member of Grantham, Mayo, Van Otterloo’s asset allocation team, laid out that negative forecast last week when he spoke in London at a research symposium hosted by Societe Generale.
The buzz is that China real estate is back. After nearly a year of steep discounting, with both land and housing sales in April looking like they were falling of a cliff , the market was electrified in late May by stories of would-be home-buyers lining up around the block and entire luxury developments selling out on the days sales opened. China Securities Journal reported that Beijing housing sales were up 46.5% YoY in May, Xinhua reported they were up 50.6% YoY in June, and property agency Centaline says they’ve continue to surge at 37% YoY in the first half of July. Over Dragon Boat Festival weekend, in late June, China’s Housing Ministry said sales volume for Beijing residential property soared 289% YoY (nearly 4x), and Centaline said six other cities saw sales growth greater than 100% YoY that same weekend. In Shanghai, housing sales surge 65% WoW in late June and, according to China Business News, primary market sales that month rebounded close to their five-year average.
Yesterday, I began an investigation into the potential causes behind the latest bump in China’s property sales numbers, and whether they portend a genuine turn-around in the nation’s real estate market. I noted that five basic theories to account for what has been happening, and promised to examine them each in turn: Lower Prices are Bringing Buyers Back Looser Restrictions are Unleashing Pent-Up Demand Optimistic Buyers are Misreading the Market Government Intervention is Boosting the Numbers Developers are Fudging Numbers to Stay Afloat In my last post , I concluded that it was certainly possible that a fall in both real and nominal property prices could explain a recovery in sales, as properties become more affordable to buyers.
In the preceding posts, I examined the first two out of five basic theories that might explain the latest bump in China’s property sales numbers, and whether they portend a genuine turn-around in the nation’s real estate market: Lower Prices are Bringing Buyers Back Looser Restrictions are Unleashing Pent-Up Demand Optimistic Buyers are Misreading the Market Government Intervention is Boosting the Numbers Developers are Fudging Numbers to Stay Afloat Now I’ll turn my attention to the third: 3.
For a while now, analysts have been arguing there is a bubble in China’s property market. Using records from 35 major cities this column finds evidence of a housing bubble. It compares house prices to cointegrated fundamentals and finds that property in China is in general overvalued by around 20% – and even more so in the boom towns. For many observers, the Chinese economy has been spurred by a bubble in the real-estate market, probably driven by the fiscal stimulus package and massive credit expansion (Nicolas 2009). For example, the stock of loans increased by more than 50% since the end of 2008.
Author: Kam Wing Chan, University of Washington In the popular media and the business world, urbanisation is often cited as the fundamental driver of global economic growth, especially for the next few decades. The assumption is that a rural–urban shift will transform poor farmers into industrial and office workers, raising their incomes and creating a massive consumer class. Imagine farmers who once led simple, subsistence lives becoming workers in the city, buying up apartments and furnishing them with appliances.