Exactly true, just as it was during our bubble years, I remember telling people and even arguing with people that real estate was going to collapse and foreclosures were going to number in the millions and most of them ignored my opinion, some even laughed. Well fast forward and man were they fucking wrong. Shanghai is in a bubble.
When you constantly paint a doomsday scenario in every sector and industry, you're bound to be correct once in a while. Don't act like you're some type of guru, because we all know you didn't make any money on the housing collapse.
but this is exactly where I strongly disagree with the blogger, I claim that demand actually easily outstrips supply. The problem is that the bid/ask spread is incredibly wide and, most importantly, that everyone is looking for more clarity what the government is gonna implement in order to curb the real estate sector. In-transparency is what keeps everyone on hold.
generalizations are bliss. Yes certain segments are in a bubble but would you short the housing market if there was such derivative that allowed you to take exposure to the downside? Would you put on the trade right here, right now? I highly doubt it.
By in-transparency I am assuming you mean lack of transparency. When is the Chinese government ever transparent? When you control the media you control information. Which enables you to say whatever you like and have it printed as fact. I am not like those who believe everything coming from the Chinese government is unreliable, but for obvious reasons one must be skeptical. The Chinese government can change the rules at any time without warning. Does not exactly give an investor peace of mind.
http://www.globalpropertyguide.com/Asia/China/Rental-Yields Last Updated: Feb. 18, 2010 BEIJING- Apartments COST (US$) YIELD (p.a.) PRICE/SQ.M. (US$) TO BUY MONTHLY RENT TO BUY MONTHLY RENT 55 sq. m. 232,320 603 3.12% 4,224 10.97 85 sq. m. 365,585 887 2.91% 4,301 10.44 120 sq. m. 568,320 1,184 2.50% 4,736 9.87 155 sq. m. 719,665 1,548 2.58% 4,643 9.99 185 sq. m. 860,250 1,928 2.69% 4,650 10.42 250 sq. m. 1,231,250 2,865 2,79% 4,925 11.46 350 sq. m. 2,149,000 4,669 2.61% 6,140 13.34 CHENGDU- Apartments 40 sq. m. 47,360 166 4.21% 1,184 4.15 60 sq. m. 72,840 251 4.14% 1,214 4.19 85 sq. m. 103,615 307 3.55% 1,219 3.61 120 sq. m. 142,200 406 3.42% 1,185 3.38 155 sq. m. 182,280 490 3.22% 1,176 3.16 200 sq. m. 254,600 n.a. n.a. 1,273 n.a. GUANGZHOU - Apartments 35 sq. m. 93,940 268 3.43% 2,684 7.67 55 sq. m. 134,090 420 3.76% 2,438 7.63 80 sq. m. 168,880 479 3.41% 2,111 5.99 120 sq. m. 279,480 821 3.52% 2,329 6.84 200 sq. m. 487,000 1,628 4.01% 2,435 8.14 SHANGHAI Ordinary apartments 35 sq. m. 106,540 250 2.81% 3,044 7.14 55 sq. m. 150,755 355 2.67% 2,741 6.09 80 sq. m. 196,240 390 2.38% 2,453 4.87 120 sq. m. 330,120 604 2.19% 2,751 5.03 SHANGHAI Luxuriuos apartments 80 sq. m. 496,080 1,368 3.31% 6,201 17.10 120 sq. m. 653,880 1,765 3.24% 5,449 14.71 150 sq. m. 822,000 2,250 3.28% 5,480 15.00 175 sq. m. 919,100 2,681 3.50% 5,252 15.32 225 sq. m. 1,393,875 3,992 3.44% 6,195 17.74 300 sq. m. 1,641,900 5,427 3.97% 5,473 18.09 SHENZHEN - Apartments 30 sq. m. 78,900 270 4.11% 2,630 9.01 50 sq. m. 135,450 440 3.89% 2,709 8.79 80 sq. m. 218,800 567 3.11% 2,735 7.09 120 sq. m. 389,520 922 2.84% 3,246 7.68 200 sq. m. 801,600 1,786 2.67% 4,008 8.93
http://www.globalpropertyguide.com/Asia/Hong-Kong/Rental-Yields Below are the figures for Hong Kong where I live. USD10k/square meter for a decent apartment. USD20k/square meter for a luxury one. A lot of the apartments are bought by investors from mainland China. Hong Kongâs biggest-ever property boom Last Updated: Apr. 27, 2010 MIDLEVELS - Apartments COST (US$) YIELD (p.a.) PRICE/SQ.M. (US$) TO BUY MONTHLY RENT TO BUY MONTHLY RENT 55 sq. m. 660,495 2,461 4.47% 12,009 44.74 85 sq. m. 1,206,830 3,607 3.59% 14,198 42.44 120 sq. m. 1,970,640 5,332 3.25% 16,422 44.43 175 sq. m. 3,453,450 8,243 2.86% 19,734 47.10 250 sq. m. 5,917,500 12,990 2.63% 23,670 51.96 THE PEAK - Apartments 200 sq. m. 5,745,600 11,602 2.42% 28,728 58.01 300 sq. m. 9,885,600 18,168 2.21% 32,852 60.56 HONG KONG ISLAND - Apartments (other luxury areas) 120 sq. m. 2,222,400 5,137 2.77% 18,520 42.81 160 sq. m. 3,384,480 7,661 2.72% 21,153 47.88 200 sq. m. 4,328,800 9,496 2.63% 21,644 47.48 250 sq. m. 6,966,000 13,130 2.26% 27,864 52.52 350 sq. m. 8,625,750 18,739 2.61% 24,645 53.54 KOWLOON TONG - Apartments 120 sq. m. 1,931,640 4,348 2.70% 16,097 36.23 200 sq. m. 3,864,400 6,716 2.09% 19,322 33.58 NEW TERRITORIES - Apartments 80 sq. m. 608,000 2,081 4.11% 7,600 26.01 120 sq. m. 1,273,800 3,782 3.56% 10,615 31.52 170 sq. m. 1,945,990 6,025 3.72% 11,447 35.44 250 sq. m. 3,617,000 8,683 2.88% 14,468 34.73
Two questions: 1) Does anyone know whether European mortgages are (typically) recourse? I.e., can the bank go after your other assets, or are they limited to claiming the property? 2) Can Europeans discharge their debts through a personal bankruptcy process, which is wiped off your record within a specified time frame? 3) Are loans structured with huge balloons in interest payment? I ask, because I personally believe these were huge contributors to the US real estate decline. The real decline in property values didn't come from transactions between individuals... but usually only when owners (often investors) simply walked away from their properties, giving up possession to the lender. This often occurred when debt payments "adjusted" to a much higher rate. This is fundamentally different from the situation in China. Mortgage loans in China are absolutely recourse: you can't "walk away", the debt stays with you indefinitely. Debts in China can not be discharged by bankruptcy; the debt stays with you indefinitely. Loans are all adjustable, but within a range specified by the central bank. There are TIGHT standards on loan to value (<80% appraised value), loan to income, and even age of borrower (mortgage maturity + age <= 65). So, with that in mind... let's say that you're a real estate speculator in China, and your property is now under water. What's your motivation for selling? If you sell, you still *have* to immediately repay the negative equity value. On the other hand, if you don't sell... the requirement is that you maintain the same debt payments you've already been paying for X number of years. As long as the broader economy does not crash, there simply will NOT be a cascade of defaults leading to depression prices.
also i forgot to mention that demographics are different, most rural chinese citizens live in large families under one roof unlike single gay guy in nyc who own 4000 sq foot lofts.