Monday, May 18, 2015

Thought house prices could only ever go up

China's new home prices fall for eighth month

The price of new homes in China fell for the eighth consecutive month in April, showing the property sector continues to be a major drag on the world's second-largest economy. The average price in China's 70 major cities fell 6.1% from a year ago - the same rate of decline as in March. A large inventory of unsold homes is weighing on the once red-hot market. The property sector accounts for about 20% of China's economy, according to economists.

Posted by mark @ 11:46 AM (6236 views)
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7 thoughts on “Thought house prices could only ever go up

  • That could never happen here.

    Right?

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  • pete green says:

    I have no evidence of this but it is interesting to speculate that the movement of ‘borrowed’ money supply globally is harmonising the global business cycle and thus asset bubble. So one could speculate that we could face a global asset(mostly land prices) crash at some stage. If New Zealand, Canada, Australia UK and all the asset bubbles in cities across the world all started affecting each other.

    Can our central banks run out of firepower? A brief review of economic history tells us they can and do.

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  • Obviously the Chinese have not been enlightened by Libertas’ “multiples multiplying” theory. Conversely, maybe it would make more sense after being put backwards through googletranslate to Chinese.
    N

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  • @mark – If china buys more bonds then they’re effectively devaluing the Yaun against the dollar and giving america more $$$ to buy dollar shop products with. Keeps the Chinese wage slaves from losing their jobs and revolting against the government.

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  • The work of shadow banks with quick-in, quick-out, high-return asset investments that first drive up asset prices and then cause their volatility in the interests of the super-rich whose funds the shadow banks manage.

    Total assets under management by shadow banks (investment trusts, hedge funds, private equity and wealth and asset management firms etc.) in China grew from a few hundred billion USD in 2009 to about $10 trillion now, much of it to local government-managed infrastructure, real estate, stock and bond markets and real-economy enterprises, all areas where debt has accelerated and produced financial bubbles. Most of the increase in debt in China (from 130% of GDP five years ago to about 240% now – despite big rises in GDP) is private sector and short-term, requiring frequent rollover – about a third of new debt is to refinance old debt. The economy becomes vulnerable to rising interest rates, defaults, panic selloffs and credit crunch. Warning signs are a decline in real estate values, falling old-enterprise (steel, coal) revenues, local government defaults and fall in the Yuan, all of which have happened in the last 18 months. The government has tried to curb shadow banks but it’s been unable to prevent the economy from slowing as it attempts to dampen asset prices.

    These shadow banks profit from excess lending and debt creation and from creating financial asset bubbles to benefit their wealthy investors. In the process of generating excess financial profits they destabilise economies – falling currencies, import inflation, capital flight, financial asset collapses, credit crunches and crashes, and deep recessions.

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  • I wonder how the demographic dynamics are going to affect China? Japan’s land market has been in terminal decline since the population peaked.

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