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The Masked Tulip

China's Spectacular Real Estate Bubble Is About To Go Pop

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So you thought that UK housing was unaffordable. Try Beijing and Shanghai, where as can be seen from the graphic below, prices are off the scale relative to income, the commonly used yardstick for measuring affordability. OK, so these are the boom cities of the Chinese economic miracle, but even on a nationwide basis, affordability is no lower than in the UK.
Little noticed amid the furore of the euro crisis, HSBC’S preliminary survey of China’s factories, published this week, indicated manufacturing activity in the world’s second-biggest economy actually declined in July from the month before, the first such contraction in a year. The HSBC purchasing managers index for China has been falling for months now, indicating a protracted fall off in growth as the Chinese authorities act to rein in rampant inflation.

House prices look like being a major victim of this slowdown.

http://blogs.telegraph.co.uk/finance/jeremywarner/100011023/chinas-spectacular-real-estate-bubble-is-about-to-go-pop/

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This one has been on the radar for about a year. I reckon they thought they could spend their way out of any effect from the world crisis. But they can't. They closed thouands of factories as demand fell, then spent tons of monet building dozens of unwanted cities, complete with Mways and shopping malls and 64 million apartmenst ALL LYING EMPTY AS GHOST TOWNS!

Meanwhile a property boom of unprecendented proportions gripped the afluent classes! IT WILL BURST and quite soon, having a real effect on all of us. They amy not buy bonds in the quatity they did; they will not buy iron ore from Australia as they did, or coal or anything. The Eurozone will not be able to to afford the bail outs they are engaged in. The depression, put off by the printing presses will fail. I am an optimist - after all that, we will recover but not until the reality has had its way. Much cheaper if we had just got on with it in the first place. Might even be a few green shoots by now. Brown, Obama and the Eurozone were total ar*****es.

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Damn, i was hoping their ability to hire each other for manufacturing would be destroyed by insane housing costs to level the playing field with us. Looks like their economy will be saved by a HPC after all :rolleyes:

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What's going to be the trigger? Chinese housing collapse, one of the PIIGS, the US defaulting or the Brown miracle economy finally collapsing?

So many to choose from it's like being at the roulette wheel.

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More worrying still, direct lending to real estate (developers and household mortgages) makes up around 18pc of all bank credit (see second graphic below). Again, even by UK standards, this is extreme. And for local authorities, which account for 82pc of public spending in China, property related revenues are an important consituent of the overall revenues used as collateral to back borrowing to fund property and infrastructure development. There’s an element of ponzi scheme here.

When this blows up it's going to be one hell of a crash.

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Can't the Chinese just print a couple of trillion to paper over the cracks?*

Also, I really like how hyper-bearish the Telegraph is at the mo. Does it have a vested interest against property speculation?

(*out of thin air, of course)

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What's going to be the trigger? Chinese housing collapse, one of the PIIGS, the US defaulting or the Brown miracle economy finally collapsing?

So many to choose from it's like being at the roulette wheel.

...combination of all and the current trend of less exports from China required due to crashing demand accelerating in the West ... :rolleyes:

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Small point but the graph is of the price a 70 square metre home, versus average household disposable income -

I guess a lot depends on definition of "disposable" - are we talking net of taxes, food, housing, heating and other essentials?

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Small point but the graph is of the price a 70 square metre home, versus average household disposable income -

I guess a lot depends on definition of "disposable" - are we talking net of taxes, food, housing, heating and other essentials?

...usually...the amount left after living costs.... :rolleyes:

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Small point but the graph is of the price a 70 square metre home, versus average household disposable income -

I guess a lot depends on definition of "disposable" - are we talking net of taxes, food, housing, heating and other essentials?

In these circumstances, "disposable income" generally means net of taxes or "net of income tax". You spend your "disposable" income on things that aren't necessities, food being an example of something that isn't a necessity. <_<

Edited by Tiger Woods?

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the difference here is that they have deliberately popped their own bubble.

because their leadership is more intelligent than ours, which doesn't bode well generally.

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In these circumstances, "disposable income" generally means net of taxes or "net of income tax". You spend your "disposable" income on things that aren't necessities, food being an example of something that isn't a necessity. <_<

Not sure, Tiger. Wouldn't they have used the term net income? I suspect that like South Lorne it may mean available income after living costs including housing. In which case I wonder if a house price 20x disposable income doesn't seem too far out of kilter with much of the rest of the world?

Eg. in UK house £200k / household gross income £35k/ household net income £25k/ disposable income after housing costs etc £10k? (made up figures)

Not saying there is no bubble there, just wonder if the scale may be more similar to much of the rest of the world than this article suggests

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One of my Chinese friends bought an apartment in Beijing 2 years ago. In a recent email he informed me that his apartment has apparently increased in price by a sum equivalent to his gross annual salary each month. He didn't say that to boast, but as part of a "China is mental" rant that he occasionally does. I said he might want to sell. He agreed but said his wife would divorce him and his parents would have him committed. Apparently no-one sells property in China and prices only ever go up. :huh:

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One of my Chinese friends bought an apartment in Beijing 2 years ago. In a recent email he informed me that his apartment has apparently increased in price by a sum equivalent to his gross annual salary each month. He didn't say that to boast, but as part of a "China is mental" rant that he occasionally does. I said he might want to sell. He agreed but said his wife would divorce him and his parents would have him committed. Apparently no-one sells property in China and prices only ever go up. :huh:

damn that's spooky isn't it

but great news

they'll be as ******ed as us soon

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One of my Chinese friends bought an apartment in Beijing 2 years ago. In a recent email he informed me that his apartment has apparently increased in price by a sum equivalent to his gross annual salary each month. He didn't say that to boast, but as part of a "China is mental" rant that he occasionally does. I said he might want to sell. He agreed but said his wife would divorce him and his parents would have him committed. Apparently no-one sells property in China and prices only ever go up. :huh:

Over here, the wife would divorce him anyway.

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One of my Chinese friends bought an apartment in Beijing 2 years ago. In a recent email he informed me that his apartment has apparently increased in price by a sum equivalent to his gross annual salary each month.

So what salary multiple was it worth when he bough it? Even if it was free to start with, a year later it can only be bought by borrowers who can spend something in the region of his entire net income just on the interest. I suppose he'll need to look for a cash buyer if he somehow convinces the family to sell ...

Edited by MongerOfDoom

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Not sure, Tiger. Wouldn't they have used the term net income? I suspect that like South Lorne it may mean available income after living costs including housing. In which case I wonder if a house price 20x disposable income doesn't seem too far out of kilter with much of the rest of the world?

Eg. in UK house £200k / household gross income £35k/ household net income £25k/ disposable income after housing costs etc £10k? (made up figures)

Not saying there is no bubble there, just wonder if the scale may be more similar to much of the rest of the world than this article suggests

Hit NTS, I'm basing this opinion in part on the way the Australian Bureau of Statistics defines the term and on the way it seems to be defined in other investment contexts. It isn't what I mean when I use the term in casual conversation, but it does appear to be the standard economic definition. see e.g. this link.

You just have to look at things from a government's perspective. They don't give a rats what you do, as long as you pay your taxes...everything else, such as eating, is optional. :angry:

Bardon (God rest his soul) always kept trotting out disposable income increases as an indication of everything being just dandy in Australia. I figured this was either a duplicitous smokescreen or he thought the ABS meant the colloquial definition (i.e. actual fritter money.)

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One of my Chinese friends bought an apartment in Beijing 2 years ago. In a recent email he informed me that his apartment has apparently increased in price by a sum equivalent to his gross annual salary each month. He didn't say that to boast, but as part of a "China is mental" rant that he occasionally does. I said he might want to sell. He agreed but said his wife would divorce him and his parents would have him committed. Apparently no-one sells property in China and prices only ever go up. :huh:

He must be a very lonely man... not an unusual experience for a lot of us on here, especially in the mid-noughties.

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  • 285 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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