Thursday, July 15, 2010

Notes on the Chinese property market

China's Real Estate: Black-Hole Capital Trap

If you think you have it bad in the UK, here's a postcard that points out why it could be even worse in China: "Despite the general mood of optimism fueled by rising property prices in China, history suggests that all bubbles end badly. The bubble in Chinese stocks certainly did; the Shanghai Index has fallen over 55% from its late-2007 peak. The restrictions which effectively funnel China's vast savings into savings accounts that don't even match inflation or into speculative asset bubbles in stocks and real estate boosts the risks of serious losses for Chinese savers and investors, many of whom have relied on the savings of three generations to buy investment homes."

Posted by quiet guy @ 02:00 AM (1846 views)
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27 thoughts on “Notes on the Chinese property market

  • Don’t be stupid!!!

    China authority has capped banks mortgage lending ratio of 50% LTV of second home and banned banks lending to third home. Hong Kong Monetary Authority implements a policy for 75% mortgage lending for decades & you won’t be able to get 80% mortgage loan on property in China. Aggregate mortgage lending in China accounts for about 19% of GDP versus more than 100% GDP in UK and USA.

    The property market in China is the healthiest (from all angles) in the world.

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  • The reason for the fall in Shanghai and Shenzhen stock markets is due to China Government keeps on issuing state debentures to remove surplus liquidity it injected into the economy after 2008 Financial Tsunami. The China authority is having a more targeted approach to deal with the property bubble and it’s reluctant to raise interest rate that hurts every sectors of the economy.

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  • What a moron saying three generation property mortgage in China!!!!!!

    Do you know the extent of escalating wage increase in China?

    Just Foxconn has given workers 30% wage raise this year. That is still a huge gap in comparison to other factories owned by Japanese or Taiwanese.

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  • What s moron saying many buildings in Beijing are built with the cheapest materials available!!!!

    China is using concrete to build a residential complex unlike bricks in UK!!!

    That Chinese two-income couple in their 30s probably makes combined $7,000 or $8,000 a year??????? It really makes my laugh after reading this article.

    IF YOU WISH TO SEE CHINA COLLAPSE I AM SURE YOU WILL BE DISAPPOINTED!!!

    CHINA WILL BECOME RICHER AND PROPER THAN YEARS BEFORE.

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  • @Simon68

    “IF YOU WISH TO SEE CHINA COLLAPSE I AM SURE YOU WILL BE DISAPPOINTED!!!

    CHINA WILL BECOME RICHER AND MORE PROSPEROUS THAN YEARS BEFORE.”

    Hmm. That’s a lot of passion! Are you from China?

    Personally speaking, I’m bullish about the Chinese economy in the long term but I tend to agree with CHS that there appears to be some questionable investments in property right now.

    I’m going to post another article on the same subject from Zero Hedge. By all means criticize but let’s keep it polite eh?

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  • “Personally speaking, I’m bullish about the Chinese economy in the long term but I tend to agree with CHS that there appears to be some questionable investments in property right now.”

    There is low leverage of property investment in China, investors take risks and returns, no need for government bail out!!!!!!!!! What’s the problem with property speculation in China? Do you have an issue with huge money earned from property investment in China?

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  • Do more homework/research or ask local E.A./academics in China before spinning your guff to avoid it becomes laugh stock!!!

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  • sibley's love child says:

    “….before spinning your guff to avoid it becomes laugh stock!!!”

    I think you’ve pipped everyone to the post there.

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  • “China is using concrete to build a residential complex unlike bricks in UK!!!”

    Bricks? The UK now uses steel frames and cardboard. I expect if you scratch the paint you’ll see a weet-a-bix logo.

    “about fishbowl”

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  • “no need for government bail out”

    The article doesn’t say anything about bailouts and nor did I.

    “What’s the problem with property speculation in China?”

    My idea is that property speculation might turn out badly.

    “Do you have an issue with huge money earned from property investment in China?”

    This blog has ‘issues’ with property speculation but not particularly the Chinese property market more than any other property market.

    You seem to take this very personally. I’m not sure why.

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  • TO: quiet guy said

    The article is talking about China property not UK property.

    However the views expressed in the article is distorted…..

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  • Property is the same as all investments like Gold, Oil future or Stocks………………….is due to rise and fall.

    All points articulated in the report are Negative; unlike quality newspapers with views on both sides (pros and cons).

    I baffle by what you said “You seem to take this very personally”?

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  • Bricks? The UK now uses steel frames and cardboard…………

    Now? Do you mean property built in 2000 or victoria houses?

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  • It isn’t succinct analysis of China property market but just a lousy report to attract attention!

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  • UK is full of victorian built terrace houses……………………

    With the beginning of the railways and new manufacturing processes, previously locally produced building materials became available all over the country. This meant the end of all houses in the local area being built using the same building materials. Houses made of local stone, timber and straw could now, for example, be built of bricks from Bedfordshire and slate from North Wales.

    The new mass produced bricks were cheaper and required less preparation and maintenance, so for the first time all over the country new mansions, chapels, cottages, barns and factories were made from the same material irrespective of region.

    http://www.woodlands-junior.kent.sch.uk/Homework/houses/victorian.htm

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  • Rental John says:

    Dear ‘simon68’…are you actually a PRC mouthpiece?

    If so please peddle your rants on another blog……thank you.

    There are fundamental flaws in the Chinese property owning model. New build apartments are bought off-plan as pure investment, with no plan whatso ever to live in or rent out the property. Where these new build apartment blocks are built is usually on ex-commercial / factory plots, and lack local infrastructure (schools, shops, hospitals, transport links, not to mention local jobs), utilities to cope if all were occupied. This is the biggest bubble and ponzi scheme ever (if you ignore what is going on in Dubai)…..and will collapse catastrophically as the value falls and everyone tries to sell all at once. Workers tend to live in factory provided dormatories, and their earnings are sent home….they have neither the money or aspiration to buy or rent an apartment.

    This is not a criticism of the Chinese situation – but the fact of the situation. I have travelling in southern China, {& HK, and Taiwan – Taiwan has similar empty new builld apartment blocks} in recent years. It is so obvious, especially in the nightime, that all these aprtments are empty – not a single light on. It is not only empty residental properties, but many empty or almost empty commercial office blocks, and shopping malls, in the city centres….

    I expect simon68 will post several times after this.

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  • YES, Empty Houses in Britain!!!!!!!!!

    Half a million houses are lying empty, Guardian research shows• 1.8 million households are waiting for a council house
    • Vacant properties could house 25% of families on waiting lists
    (20)Tweet this (94)Comments (29) Ian Griffiths guardian.co.uk, Sunday 4 April 2010 17.49

    Charities are demanding an urgent rethink of government housing policy after a Guardian investigation found that almost half a million homes are lying empty in the UK – enough to put a roof over the heads of a quarter of the families on council house waiting lists.

    The startling picture of neglect – we estimate that more than 450,000 properties have been empty for at least six months – at a time when there is an acute housing shortage was pieced together using information gathered from local councils under the Freedom of Information Act.

    Our findings suggest the number of “long term vacant” properties is 25% higher than previously thought. David Ireland, chief executive of independent charity the Empty Homes Agency said the empty stock would go some way towards tackling the housing crisis – 1.8 million households are waiting for a council house – as opposed to the government’s focus on building new homes to tackle the problem. “Refurbishing empty homes cannot deal with the entire housing crisis but it can make an important contribution,” he said.

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  • TO: Rental John

    Which provinces or towns did you visit in southern China?

    You logic isn’t sound right! The new built isn’t ex-commercial/factory, otherwise there couldn’t be lack of local infrastructure. If it’s a redevelopment project on pre-WII period properties, then the building site is already surrounded by schools, shops, hospitals, transport links.

    China is undergoing a urbanization process converting villages into modern cities, that is why the Chinese government needs to invest in all kind of infrastructure projects including highways, roads, bridges, high speed rails & shopping complex etc.

    Those workers in southern China are out of hometown and they do not have social security account in the city they reside. Without social security account their children won’t be able to get into the government run school (low costs), no medical and retirement benefits etc. They are just transient population and deem to return home someday. It is cheap to build a house in hometown village than to buy a flat in city; so they are not tempted to buy/rent an apartment out of town.

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  • Quick question, my friend needs to get a visa at the Lo Wu boarder to enter Shenzhen tonight. Does anyone know what time the office closes at the boarder? And if he is holding a UK Citizen passport with no HKID, he should be ok, right?

    I went to the usual China customs office building upstairs and I was told they don’t process visa there anymore. They were quite rude though and they didn’t even advice me what to do next. After a few clarifications I was advice to go back to HK and apply for one. In order for that to happen I need a signature from one of the Chinese Immigration Officer and hand it to the guard in the bridge for me to go back to HK and it took awhile for that to happen.

    They’ve got a new policy now. In the past you can apply for SZ visa at the border. Now, you need to apply in advance either via the Chinese Embassy or any agencies specializing China visa but there is no guarantee that you will get the visitor visa at last. This policy is being implemented after the 2008 Beijing Olympic Game.

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  • Try to breathe between postings Simon.

    I’m not sure he/she will be alright. Your friend needs to obtain visa before, usually in UK.

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  • Duration of Stay of a Visa

    Duration of stay of a visa refers to the longest period the visa holder is allowed to stay in China from the date of entry into China on each visit.

    After entry into China, a foreign citizen who needs to stay in China longer than the duration of stay on the visa must apply for an extension of stay at a local public security bureau before the expiry of the duration of stay on the visa. This does not necessarily mean your application for the extension of stay will for certain be approved. The applicant shall bear any consequences arising therefrom.

    Overstay in China violates the laws and regulations of China on control of the entry and exit of foreigners, and could be fined or punished with other penalties.

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  • TO: tom101

    I did go into Shenzhen, China via Lou Wu Boarder using a foreign passport in 2006 without the need to apply for visitor visa in advance. At that time the China customs at Lou Wu Building can issue a 1 day valid visa to China but this policy has been removed in 2008.

    Unless you are a native Hong Kong Chinese or Macau Chinese where you can apply for a 10 years China Return Home Permit, with that permit you can reside in China without any limitation and you can buy property, open bank account or even run a business of your own.

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  • China Property Bubble? So What!

    Against Bubble

    Trends of increasing urbanization and rising incomes in China that could continue to support real estate prices.

    Comparatively conservative mortgage lending practices, particularly in contrast to those at the height of the United States housing bubble mount up by debts.

    “will collapse catastrophically as the value falls and everyone tries to sell all at once……………” Yes, this is the exact scenario to be happened in UK once BOE decides to pull the plug for heavily indebted BTL landlords/mortgage borrowers and zombie bansters.

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  • Comparatively conservative mortgage lending practices, particularly in contrast to those at the height of the UK & USA housing bubble mount up by debts.

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  • Simonboremesilly says:

    Oh Simon, oh Simon. I think property prices have had some delirious effect upon you. Do you actually listen to what anyone else has to say, or are you just on here to read your own posts? Please attempt to refrain from clicking on ‘add comment’ just once in a while, and people might just read something beyond ‘simon68 said…’.

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  • CHINA WILL FOLLOW UK TO REQUIRE IMMIGRANTS ABLE TO SPEAK & WRITE CHINESE LANGUAGE TO BETTER INTEGRATE INTO LOCAL COMMUNITY

    Immigrants to face Chinese Language test under new residency laws

    Immigrants coming to China or Special Administrative Regions of Hong Kong or Macua to marry or join their partner will soon be asked to take and Chinese language test first.

    All non-Asian migrants will have to demonstrate basic communication skills that enable them to deal with everyday life before receiving a visa.

    The measure, due to come into force next year, will apply to spouses and unmarried couples who are already in China, Hong Kong or Macau as well as overseas applicants. Anyone wishing to come to China must first demonstrate they can speak Cantonese, Mandarin and any one Chinese Dialects in the cities they decide to reside (also write traditional Chinese characters or simplified Chinese characters) and their Chinese at the same level required for skilled workers admitted under the points-based system.

    “HONI SOIT QUI MAL Y PENSE”

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  • I think everyone knows that real estate speculation happens in every country but EVERYONE also knows that too much of speculation will hurt a country’s economy especially if the bubble burst.

    Being a civilize human being, we know that we should read online articles with a pinch of salt. If we knew the statement is incorrect, feel free to express urself but it wouldn’t be nice if our words are too ‘sharp’. Harsh words can kill people.

    We are here to gain more knowledge and to share our knowledge, not to show that we are greater than anyone else. If u r trying to discriminate, maybe its time to civilize urself.

    Above is just my 2 cents of thoughts, please take it with many pinches of salt. =)

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