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Inside China’s Housing Bubble

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This Salon article is relevant if the Chinese have an effect on the local market… and possibly some lessons to learn.

Money shot:
“But as one employee of the factory told me, the primary force pushing Guangxi’s economy forward is housing. In fact, the land upon which the factory was situated had become so valuable that the company was planning to sell it and move to another location — that was the primary business development plan!”

That’s a new twist on the flip.

…….

“One government official we spoke with on Thursday, representing the Guangxi Ministry of Commerce, apologized to us for the fact that the building we were meeting in had “only been built in 1995.” If you want to know what 10 percent economic growth, compounded annually, looks like, a visit to the city of Nanning offers a visceral introduction. But it also sounds a warning bell.”

Read the full article over at Salon.com

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jesse

@Anonymous: "Until the risk is known – even within some rough bounds – it’s almost impossible to factor it in."

Because the exact date of my death is unknown I should not plan for providing for my family if I die? Give me a break.

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redflagreview

@CRASH JPMorgan-Chase: Love your letter, very funny. Here is another funny video called quantitative easing explained on YouTube
http://www.youtube.com/watch?v=PTUY16CkS-k

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Dave

@Patiently Waiting:

You should change your name to Patiently Hating. Hate is a pretty strong word. Life's too short to hate people.

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D. Rail

….Muhammad Ali Jabbar considers himself one of the lucky ones. When he graduated with a degree in mechanical engineering from Toronto’s Ryerson University last year, the 25-year-old Milton, Ont., resident already had a decent-paying job lined up in his field. But even so, he finds himself struggling to pay his mortgage, his $30,000 student loan and $15,000 line of credit. “Basically all the money I make goes to paying bills,” he says. “I wasn’t able to make my payments last month and I got a call from a collection agency. It’s discouraging.” ….. There's the problem right there. WTF is a guy one year out of school doing with a mortgage? I mean really, what ever happened to having a few drinks, travelling a bit, and getting laid? Time to remove the pocket protector buddy and give your head a… Read more »

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patriotz

@ulsterman: I don’t recall his (Dave's) actual predictions but when he say that prices won’t decline more than 10% or will simply stagnate for years, i just see that as his opinion. It’s not a reason to froth at the mouth and hit the down arrow. I mean, it’s not an outrageous opinion – maybe they will just plateau, i don’t know. From "Ship of Fools": Kelly [Morgan Kelly, professor of economics at University College, Dublin] cut through the favoured phrase of government, cheerleader economists, banks and property companies – 'soft landing' – like a scalpel through silk: A soft landing is not so much unlikely as contradictory. Suppose that house prices really were expected to level off, then the owners of the tens of thousands of empty houses and apartments can expect no further capital gains and should cash… Read more »

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oneangryslav2

@Anonymous:

Muhammad Ali Jabbar considers himself one of the lucky ones. When he graduated with a degree in mechanical engineering from Toronto’s Ryerson University last year, the 25-year-old Milton, Ont., resident already had a decent-paying job lined up in his field. But even so, he finds himself struggling to pay his mortgage, his $30,000 student loan and $15,000 line of credit. “Basically all the money I make goes to paying bills,” he says. “I wasn’t able to make my payments last month and I got a call from a collection agency. It’s discouraging.”

What in the world is a recent university graduate doing buying at the top of a generational real estate market?!?!?! When will the insanity end? I guess not until Mr. Ali floats like a boulder and stings like a hummingbird.

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oneangryslav2

@Disbelief:

they even drive around with license plates that say “the best place on earth” we both laughed at that one.

While I agree with the general sentiment of your post, what you claim above is simply not true.

http://www.bcpl8s.ca/Passenger.html

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Patiently Waiting

Well the future ain't so bright for all the people in debt slavery. Sell a disturbed man a loaded gun, then you say what happens is of his own free will. You absolve yourselves of all blame. Thats what your industry does. I remember a few years working at a bank. In order to keep our jobs we had to maintain a level of sales of a variety of products. One thing we could do was suggest a different credit card. Well many, including myself, starting encouraging people with long-time balances to go with the low interest card. Then word came down from head office to stop doing that. That was not an intended part of their strategy and we had to be corrected. Nope, no looking out for people who are getting into trouble. Soak them for every cent… Read more »

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stagnate

i like dave, entertaining poster, accurate predictions, cannot be intimidated. i think dave is trying to focus on the future, some of the clowns here are too focused on the past. even though my prediction record is stellar there is no point relying on past glory. past glory won't count for crap if i'm wrong about next year. when someone was wrong they should admit it and move on; persons that operate in denial have the biggest credibility issues.

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fixie guy

#104 ulsterman "Dave’s opinions are coherently laid out, whether you agree or disagree with his position and perspectives. "

You're confusing measured tones with coherence. Lord knows I hear enough of that bullshit from corporate at work. Dave's opinions are incoherent and discard core economic theories whenever convenient. 'Real' valuations, and therefore inflation, don't matter? Neither does the equivalent income stream from an asset? The entire financial world says otherwise, ask a bank. Cheap rhetoric is not reasoning, but it surely helps explain WTF is going on in the minds of Vancouver market drivers so has some value from a behavioral point of view I suppose.

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Patiently Waiting

People like Dave are plain evil.

They have stoked the horribly excessive speculation in real estate that has ruined this city. Because of the emotions and social pressure associate with "home ownership" a large part of our population has placed itself in a dangerous and potentially tragic financial position. They wouldn't do this with anything else but "home ownership". This ruins lives.

I hate the entire real estate industry in this city, including Dave. That is my honest opinion.

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Anonymous

@jesse: "Second there is an inherent risk in owning that increases with tenure. While a large percentage will plod along with the scenarios he lays out, there will invariably be a small percentage of people who are not so lucky. Death, divorce, relocation, job loss, illness, legal battles, or other unforeseen financial duress will happen to some of us no matter what. If liquidation of property is required but sales are slow that spells trouble. I have yet to see any mention of accounting for these risks in his analysis." I'm sure such risks are quantifiable (e.g. "1 Vancouver owner in every X will be forced to sell in any given year due to unforeseen circumstances"), but I'm not sure how you'd go about calculating "X". I doubt there's anybody collecting such statistics, because it's hardly a legal requirement to… Read more »

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Anonymous

"I don’t recall his actual predictions…"

well do you recall the times he's "revised" his predictions? and yet he's never wrong.

"It’s not a reason to froth at the mouth and hit the down arrow."

true. i'm never foaming at the mouth when i hit the down arrow on any of his comments. i just recall how honest and forthcoming he is and then hit the down button.

the day he acknowledges he's been wrong is the day i'll start listening to what he says. something tells me i'm in for a looooong wait.

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Archie Bunker

106 anon Says:

November 22nd, 2010 at 9:15 pm

Does anyone here know much about Hamilton (ie, east of richmond)? It’s hard not to notice the bang for buck ratio there, but I am not sure of things like schools, commute times, etc. Curious if anyone here has any advice on this? Looks like a nice family neighborhood so long as its not at too much expense of these..

======

Check the covenants…much of the area was built on very deep peat.

I'd be worried about sinking foundations over time.

You have a local school but High School students need to be bussed to McNair or McNell High schools, about 5-6 miles away.

Few amenities except a small mall…or Wal Mart retail complex in Queensborough

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jesse

In fairness to Dave, I am referring to his view that one should buy now if they want to and can afford it. He postulates that in time debt payments will ease as a percentage of income due to wage increases exceeding the average and with principal repayments. I think this point of view it ignores a few basic things. First, the costs of ownership are typically higher than most people estimate. This is borne by scores of conversations with people from all walks of life giving an estimate of their ownership costs. Invariably the true costs are higher due to nickel and dime expenses and cost overruns of larger renovation projects. It also ignores how much time home owners spend managing their property when they could be doing other more productive things with their time. Second there is an… Read more »

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Archie Bunker

107 Very Wealthy Vancover House Owner Says:

November 22nd, 2010 at 9:25 pm

:

Man,get your ass straight out with a bloom,Mexican and white are very kin in spending money not saving them for mortgage or rent.That is a simple and major difference.

++++==============

Yer damn right…I don't know what the WTF you are saying but I 100 % agree.

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painted turtle

http://online.wsj.com/article/SB10001424052748704…

A series of short documentaries about the PIIGS by the Wall Street Journal. Great!

The one about the Irish housing bubble is excellent (click on Ireland).

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jesse

@ulsterman: "maybe Jesse doesn’t value Dave’s views."

No they have value. Perhaps some disagree on how much value. Call it the consumer surplus or the "Davership premium".

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Very Wealthy Vancove

@Disbelief:

Man,get your ass straight out with a bloom,Mexican and white are very kin in spending money not saving them for mortgage or rent.That is a simple and major difference.

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anon

Does anyone here know much about Hamilton (ie, east of richmond)? It's hard not to notice the bang for buck ratio there, but I am not sure of things like schools, commute times, etc. Curious if anyone here has any advice on this? Looks like a nice family neighborhood so long as its not at too much expense of these..

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Ulsterman

errr, ok, maybe Jesse doesn't value Dave's views.

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Ulsterman

@Anonymous: I agree and Jesse and anonymous re: Dave. I look forward to reading his posts to get a measured bullish opinion. I don't recall his actual predictions but when he say that prices won't decline more than 10% or will simply stagnate for years, i just see that as his opinion. It's not a reason to froth at the mouth and hit the down arrow. I mean, it's not an outrageous opinion – maybe they will just plateau, i don't know. It's not like the rational analysis of the bears has borne fruit to date. Sure, maybe we have just got the timeline wrong and a 40-50% price decline is in store over the next 3-5 years, but then again maybe it isn't. Dave's opinions are coherently laid out, whether you agree or disagree with his position and perspectives.… Read more »

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jesse

@Dave: "So maybe my point of view is worth considering."

Your point of view is so myopic Mr. Magoo is a jet fighter pilot in comparison.

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Miss Johnson

fixie guy:"Exactly what realtors want, the all-Dave all Day forum"

You mean exactly what a realtor/blogger wants.

We all know who it is.

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jesse

@Anonymous: "decent-paying job"

… and even with his degree in engineering he's living one paycheque away from a call from a loan collector. Well boo hoo.

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