Article

2011-11-07 Economy

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Posted by g(r)omgoru 2011-11-07 01:58|| || Front Page|| [11130 views ] Top

#1 A rough calculation gives $25 trillion in mortgage debt in China.

Posted by phil_b 2011-11-07 02:41|| 2011-11-07 02:41|| Front Page Top

#2 Imagine how much that would be in derivatives.

Posted by g(r)omgoru 2011-11-07 02:48|| 2011-11-07 02:48|| Front Page Top

#3 That's GOOD for the Chinese economy.

High property prices can only be held up (long term) by high wages.

It's the west that's FUBARed because of their idiotic attempt to defy the economic equivalent of the law of gravity.

Posted by Bright Pebbles 2011-11-07 05:41|| 2011-11-07 05:41|| Front Page Top

#4 It will be very interesting to see how the central government in china responds to this once things really start to unravel. Very interesting.

Posted by eltoroverde 2011-11-07 07:21|| 2011-11-07 07:21|| Front Page Top

#5 A crowd of about 300 people in Shanghai smashed windows at the sales office. The protestors had bought properties in earlier phases of the same project at prices as much as 30% higher than the discounted ones.

I'd be angry, too!

Posted by Bobby 2011-11-07 07:39|| 2011-11-07 07:39|| Front Page Top

#6 My favourite contrarian Hugh Hendry will be happy. He's been telling anyone who cares to listen to short Chinese property. Only question; has he got his timing right?

Posted by tipper 2011-11-07 08:36|| 2011-11-07 08:36|| Front Page Top

#7 Tipper I don't watch TV so this Hugh Henry is new to me. He jumps about but I will take the time to sort him out. The Chinese property bubble I have been aware of for a while. The idea of a cheat economy is a good characterization of many current economies. China is a country of extremes, very rich, but far too many poor.

Posted by Dale 2011-11-07 09:37|| 2011-11-07 09:37|| Front Page Top

#8 Bobby ,
Why? Your car probably lost 30% after you bought it. Your food dropped to nothing after you ate it...

Posted by Bright Pebbles 2011-11-07 09:39|| 2011-11-07 09:39|| Front Page Top

#9 This is not good. Most middle class wealth is in private homes. When home prices fall, the middle class is gutted. You can't have a democracy without the middle class so it's bad news here, and bad news for reformers in China as well.

Posted by Iblis 2011-11-07 10:26|| 2011-11-07 10:26|| Front Page Top

#10 Silly me. I buy a house because I need a place to live. It's not an investment. It's my home.

Posted by Ebbang Uluque6305 2011-11-07 11:54|| 2011-11-07 11:54|| Front Page Top

#11 Wen Pledges Property-Tightening Resolve
This is one of the advantages of having a Fascist (or Third Way) economy, as China has. The economy is a subset of the political system. This way the economy can be controlled, so that you do not have a fiasco as you had in the US when the price of houses crashed.

Posted by tipper 2011-11-07 11:58|| 2011-11-07 11:58|| Front Page Top

#12 If you had a good government you'd have stopped the price of homes going up faster than incomes...

Look High home prices are a middle class signal as a result of high middle class incomes...

When you DONT have high middle class incomes because the state has nicked all the wealth created, but you still have high house prices it means you're getting poorer.

Posted by Bright Pebbles 2011-11-07 12:51|| 2011-11-07 12:51|| Front Page Top

#13 These aren't "real" residential properties, but rather simulacra - buildings put up for the purpose of creating investment properties.

As I understand it, rental real estate is an attractive investment in a low-trust legal environment like mainland China, where so many actual business, bond, or equity investment opportunities carry with them the significant chance of fraud or default without recourse. So newly middle-class or successful low-level entrepreneurs have an incentive to buy rental properties as a safe place to park their gains from more risky endeavors. They don't want to put the effort and expense of actually maintaining the property under living conditions or deal with actual renters, so the properties are more often than not kept empty. Thus, the vast "ghost cities" of the interior.

Since all this means that the rental property market is, in the Chinese environment, highly speculative, it also means that we've been waiting for a bubble to pop. Can't be sure if this is it, or just an initial correction. But the end will come at some point, and not long off.

Posted by Mitch H. 2011-11-07 14:50|| http://blogfonte.blogspot.com/ 2011-11-07 14:50|| Front Page Top

#14 BTW, that's the savings of the Chinese entrepenural class right there, and if it goes "pop" like a soap bubble, they'll go stark raving mad. Bad day to be Taiwan or North Korea.

Posted by Mitch H. 2011-11-07 14:56|| http://blogfonte.blogspot.com/ 2011-11-07 14:56|| Front Page Top

#15 Mitch H nails it.

Residential property is a savings vehicle seen as both safer than banks and providing a better rate of return.

Posted by phil_b 2011-11-07 15:26|| 2011-11-07 15:26|| Front Page Top

#16 I worked with a Chinese dude a couple of years ago. He had a pile of inherited money in stocks. His attitude and talk was more like a gambler than an investor. I don't know if he was the exception or the rule.

Since the Chinese are able to invest in physical precious metals, and the metals have done very well in the last few years, I'd bet they figured real estate was a better bet.

Jus' sayin'

Posted by BrerRabbit 2011-11-07 18:47|| 2011-11-07 18:47|| Front Page Top

#17 The sad thing is that these people spent a bunch of their money investing in a tangible asset under the control of a bunch of Communist thugs. It will be so sad when the commissar comes and allocates the new and empty apartments to the families of soldiers and party members.

And if you don't think that is a good idea, hey take it up with the soldier dude here, whose family is squatting in your savings plan. Somebody said that all power comes from the end of a gun. I wonder what he meant?

Boo hoo, Chinese middle class. All that hard work and savings you've been doing, it is gone now. Your Communist overlords will happily share your wealth among themselves, and you can get back to the factory. And stop bitching about low pay.

If you don't revolt now, I hope that a decade from now, you have learned to invest in portable assets, so you can get out from under the thumb of the commissar.

Posted by rammer 2011-11-07 20:54|| 2011-11-07 20:54|| Front Page Top

#18 Chinese banks are not as sturdy as they want people to think. It seems irrational for them to buy our debt when their currency may be more unstable than expected. Unless they think they may extract something of value out of the US.

There are many real estate bubbles in China, and they are using Dollars to purchase it.

Posted by newc 2011-11-07 22:21|| 2011-11-07 22:21|| Front Page Top

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