Chinese housing bubble collapse

The controlled collapse of the Chinese housing bubble seems to be proceeding right on schedule. If HAM is a factor in BC what affect will this have here?

Home prices nationwide declined in November for the third straight month, according to an index of values in 100 major cities compiled by the China Index Academy, an independent real estate firm. Average prices in the Shanghai area are down about 40% from their peak in mid-2009, to about $176,000 for a 1,000-square-foot home.

Sales have plummeted. In Beijing, nearly two years’ worth of inventory is clogging the market, and more than 1,000 real estate agencies have closed this year. Developers who once pre-sold housing projects within hours are growing desperate. A real estate company in the eastern city of Wenzhou is offering to throw in a new BMW with a home purchase.

The swift turnaround has stunned buyers such as Shanghai resident Mark Li, who thought prices had nowhere to go but up. The software engineer closed on a $250,000, three-bedroom apartment in August, only to watch weeks later as the developer slashed prices 25% on identical units to attract buyers in a slowing market.

Outraged, Li and hundreds of others who paid full price trashed the sales office, scuffled with employees and protested for three days before police broke up the demonstration. Walking away now would mean losing the $75,000 down payment that he borrowed from his working-class parents.

“I still haven’t told them,” Li, 29, said of his home’s plummeting value. “It will just make them worry, and it’s already too late.”

Full article in the LA Times.

Sort by:   newest | oldest | most voted
patriotz
Member

The Hot Asian Money that really matters is not the cash that's buying Vancouver RE, however much there really is, but the debt raised inside China that's being used to fuel their own bubble which has been pushing up the global price of commodities.

Take that away and the party is over for the real economies of Western Canada and Australia, never mind RE.

rp1
Guest
rp1

Did we say "Rich Chinese" ? We meant Rich Vietnamese, Koreans, and, uh, whatever. Buy now!

jesse
Member

FWIW prices in Vancouver peaked in early 1995 and were in a bear market until about 2000. The so-called Asian financial crisis occurred in earnest in 1997. The repatriation of Hong Kong may have figured into this but I thought it interesting peak prices in Vancouver predicated a regional financial system meltdown by about 2 years, and warning signs of distortions were evident some years before the events of 1997.

registered
Member
registered

3 jesse Says: "The repatriation of Hong Kong may have figured…"

May have? Vancouver's population growth was running around 9%/year, roughly doubling, over the early-mid Nineties. Big increase in demand + slow reacting supply = temporary price increases.

patriotz
Member

@fixie guy:

RE prices started declining in Vancouver in 1990 (around the same time as many other North American markets like LA and Toronto) and I think it's safe to say that extra demand reversed this and pushed the peak out to 1994, when prices started declining again until the global bubble.

Note that as well as a drop in population growth post-1995 there was also a massive RE bust in Hong Kong (~50%) which no doubt also contributed to an outflow in investment.

crabman
Guest

And yet Chinese RE is still performing better than their stock market which is down 63% (so far) from its peak:

http://finance.yahoo.com/q/bc?s=000001.SS&t=5

patriotz
Member

@crabman:

"And yet Chinese RE is still performing better than their stock market which is down 63% (so far) from its peak"

Stock markets are always much more volatile than RE. Stocks are much, much more liquid plus fundamentals (i.e. earnings vs rental value) are much more variable.

registered
Member
registered

5 patriotz Says:"… I think it’s safe to say that extra demand reversed this and pushed the peak out to 1994.."

Complete agreement. It's clearly visible at 1990 in Sauder's data:

http://cuer.sauder.ubc.ca/cma/data/ResidentialRea

Other markets returned to normal levels after. Vancouver was lucky to catch a heavy wave of immigration at the same time. That undoubtedly contributed to the myth of a 'different city' that never goes down.

crabman
Guest

@patriotz: Agreed. Just trying to make the point that it isn't just Chinese RE that's in trouble.

Jim Chanos has some interesting things to say about China. For those who don't know, he is very bearish and has been shorting (among other things) Chinese developers. When his research team came back from China earlier this year they told him, "We aren't bearish enough".

Conventional wisdom says China is going to continue to grow very fast and will become the world's largest economy in a few decades. History has shown that every time a country has gone through an extended period of rapid growth it is followed by a bust. For all the talk of Euro and US problems, I think China is much more likely to experience a depression in the not to distant future.

WhatProblem
Guest
WhatProblem

No collapse yet Doomsters..Will you guys EVER be right? FORECLOSURE….

http://www.bloomberg.com/news/2011-12-20/housing-

WFT?
Guest
WFT?

@rp1:

The "rich Russians" will be the next tout. It even has alliteration.

Alum
Guest
Alum

Good news for RE

Finally we see condos start to appreciate after a few years of price stability:

Builders broke ground in November on more houses than at any time in the past 19 months, led by a surge in multifamily units, signaling the market is stabilizing heading into 2012.

http://www.bloomberg.com/news/2011-12-20/housing-

patriotz
Member

@WhatProblem:

"No collapse yet Doomsters.."

Followed by a link to an article about the US housing market.

Too funny.

coastal
Guest
coastal

Have no fear people, Victoria is safe from the bubble popping according to the VREB president. Can this get any more disgusting to make statements like this that could potentially sink people into bankruptcy ? Reeks of desperation of a market on the brink of collapse.

"Victoria safe from bubble"

http://www.timescolonist.com/business/Victoria+sa

victoria
Member
victoria

and Shiller said that "Victoria" is one of the bubbliest areas in BC. My property has already declined by 10 percent.

Nancy

WhatProblem
Guest
WhatProblem

The trend is towards Urbanization…
http://www.bloomberg.com/news/2011-12-20/knightsb

jesse
Member

@fixie guy: "Vancouver was lucky to catch a heavy wave of immigration at the same time."

The same could be said for 2008-2009 where population growth was the highest since the mid-90s, which I'd argue went a long way to help bolster local dwelling demand after the GFC.

Chris
Guest
Chris

The HAM paying cash here is a difference beast. Their access to money will not change in downturn. G

o to Holt Renfrew, and you can see for yourself.

gokou3
Guest
gokou3
coastal
Guest
coastal

@Victoria: There's never a mention of declining prices in the Victoria media. Wouldn't want reality to hit home and rattle the fragile psyches in the land where prices never go down.

As Garth Turner posted on the Victoria couple who got their LOC request chopped in half due to their declining house value. You'll never hear those real stories in the TC. Bad for advertiser business.

WhatProblem
Guest
WhatProblem

You guys will probably love this article but it does say our market is "balanced"…Probably not a great "investment" right now but a place to live why not..
http://www.theglobeandmail.com/report-on-business

jumping in
Guest
jumping in

Roubini is bearish on China too.
http://nourielroubini.blogspot.com/2011/12/roubin

jumping in
Guest
jumping in

Will China break?

Krugman.

NY Times
http://www.nytimes.com/2011/12/19/opinion/krugman

jesse
Member

Scotiabank Global Real Estate Trends (PDF)

In contrast, the Canadian housing market remains an outperformer among advanced nations, with real home prices up 4.8% y/y in Q3. While the sector’s continued buoyancy is impressive, monthly data through November suggest prices have leveled off since the spring, with conditions in the majority of local markets in ‘balanced’ territory. Ultra-low interest rates are still attracting buyers, but increased economic uncertainty combined with some recent slowing in the pace of hiring could dampen demand in the new year.

Ultra-low interest rates are not attracting buyers in the US because of the thingy they have down there. Canada doesn't have a thingy apparently.

Best place on meth
Member
Best place on meth
Hainan Island, China's "Hawaii" property prices down 28% year over year: http://www.shanghaidaily.com/article/?id=490558&a… ZHU Lei, a property agent for the Serenity Coast luxury residential and hotel complex in Sanya on China's Hainan island, recalls clients carrying suitcases of cash to shop for holiday apartments last year. "We didn't even have time for toilet breaks because there were just too many clients," Zhu said. Today, sales in the second-biggest city on the tropical island often called Hawaii of the east for its sandy beaches and weather, are "bleak," he said. "Hainan is particularly vulnerable as it depends heavily on property and doesn't have many other pillars to diversify risks," said Zhang Zhiwei, Hong Kong-based chief China economist at Nomura Holdings Inc. "It's only a matter of time until the slowdown in the property market affects China's public financing adversely." This place sounds… Read more »
wpDiscuz