Shanghai real estate in HUGE HUGE HUGE bubble

Baidu, Inc.

From last year to this it has raised 4 folds, my question to S2007 is how does he differentiate a bubble from an uptrend?

 

there will never be a housing bubble in china, there will only be fluctuations in prices only, it is in the chinese blood to own a house, the first thing they will buy if they can afford is a house, if it gets cheap the next buyer will step up..there is a billion out there, its gonna take a long while

 

LOL, I usually just ignore your silly pretender posts but I gotta interject here. The homebuilders topped in 2005, quite far from a delayed symbol. If you actually actively traded them, you would know that the homebuilders turned at least a year before real estate prices took a real turn.

 

You know, you can substitute "USA" and "American" for "China" and "Chinese" and that sentence would sound like the same exact thing that was said years ago about rising real estate prices here.

I'm not saying if there is a bubble in China, nor do I really care as it is still a communist country that has become the world's sweatshop and a polluted sh*thole. I think the fact that it is still mostly a government controlled economy makes it very dangerous to call bubbles.

 

both properties that were sold, i bought them more than 5 years ago, so only had to pay 1% tax on the total sale price of one of the properties. The tax rule is a bit complicated, i dont know if it's the same in all part of the country but in shanghai:

1) If you own 1 property (primary residence) for more than 5 years, you pay no tax.

2) If you own more than 1 property (investment) for more than 5 years, you pay 1% of the total sale price.

3) If you own 1 property (primary residence) for less than 5 years, you pay 1% of total sale price.

4) If you own more than 1 property (investment) less than 5 years, you pay 1% of total sale price + 5.5% of the profit.

That's the standard, but it's more complicated like if you own luxury property (based on zones in shanghai) for example more than 10m yuan in zone x you pay the 5.5% of profit no matter what. In shanghai a lot of times you split the tax with the buyer or have the buyer pay all of it especially during the boom.

What do you mean you are the unlucky ones? do you mean the govt took the house you bought in gongzhou and didnt give you any compensation in return? i really doubt that, or do you mean they didnt give you a good deal?

 

CHINA FELL 3% TODAY!

 

Well, first we didn't get a good/fair deal. And all the neighbors felt the same way so it got dragged through countless meetings. Then we had to go through the court system and that took a while, then a developer was interested in the location; then everybody was asking for more compensation, then back to the court system again, etc...

And the house's deed is under my grandmother's name; and she already passed away at the time, and to prove it to the officials that we are the beneficiaries were another hassle...

The story can be summarized into 2 words: Bureaucratic Nightmare.

 

But the Dec 07 signal you mention was only predictive of short-term weakness in stocks. An upside failure isn't predictive of a 50-75% bear market over the next 18 months, otherwise we'd see that every year instead of every half century. So no, it isn't clear from a short-term price action sell-signal that stocks and real estate would fall that far. There were also lots of bullish signals in 2008 when the market shrugged off bad news and rallied 5-20%+ higher - were they signals to buy real estate?

Goldman were "early" and suffered initial losses for some time on their short housing trades, and lots of people at the i-bank disapproved of the trade and wanted the prop desk to cover. So it wasn't crystal clear for them either. Numerous other bears used the same data and got in too early, many having to cover or even close their firms due to client defections because they shorted in 2003, 2004, 2005 etc.

Looking at construction stocks didn't give a crystal clear signal. They were motoring ahead to new all-time highs in 2005 - so you would have been *piling in long* to Miami condos and Vegas mansions almost at the exact top if you had been using the housing stocks as a leading indicator. And don't forget the 2-3 month lead time and 5-10% transactions costs on real estate - it's hardly a market you can time in an out by using a 24-7 trading asset like stocks as your indicator.

So no, the signals you mentioned were not anywhere near as clear as you make out. Yes there were signals it was a bubble and a crash would occur, but the timing was far from certain - would it start in 04, 05, 06, 07? Which cities, markets, and stocks would fall first, which later? The depth of the decline was also extremely unclear - would it be 20%, 50%, 75%? No one knew in advance. There was a clear edge but it was by no means a can't lose, no-risk trade. Even people like Paulson who traded it incredibly well admit it was not easy and the timing was difficult.

 

Yet another article on the bubble that's growing ever so steadily, of course everyone will ignore it as usual, they did it here in the US and will do it everywhere else. Going to be interesting to see how long this bubble can stay.




Soaring China home prices thwart ordinary buyers

By ELAINE KURTENBACH (AP) – 11 hours ago

SHANGHAI — The luxury apartment buildings Yang Xuhua passes on her way to work are a daily reminder of her own frustrated efforts to buy a home. Prices for even modest apartments in Shanghai have soared, putting home purchases out of reach for white collar workers and professionals.

Yang and many other young Chinese are finding their aspirations thwarted by an overheated property market that is enriching already wealthy speculators, local officials and other Communist Party allies.

It's a hard reality for a generation that views home ownership as a given after reforms more than a decade ago created a housing market open to the masses. It's also a challenge for leaders whose reliance on rising property values and land sales to property developers risks letting the market spiral out of control.

"I sigh at every fancy apartment building I see on the way to work everyday, but that won't change anything," says Yang, whose train ride to work at a trading company takes her past legions of high-rise apartment blocks. "My salary increases but it can't catch up with rising housing prices."

The issue is getting top billing at China's annual legislative session, the party's main forum for explaining its policies and responding to public complaints.

"We will resolutely curb the precipitous rise of housing prices in some cities and satisfy people's basic need for housing," Premier Wen Jiabao pledged in his annual address to lawmakers, China's equivalent of the State of the Union speech.

The government has raised taxes and required downpayments — now a minimum 30 percent for even first-time home buyers — and warned big state companies and banks against speculative, risky investments. But no major immediate changes are expected.

"Chinese top leaders have become more and more sensitive to strong nationwide voices on issues, but the sensitivity is only at the PR level," says Ding Xueliang, a China expert at Hong Kong's University of Science and Technology.

Rising property prices have underpinned economic growth rates, benefiting local governments that tend to be heavily invested in property development and other related businesses. Land sales often help finance construction projects that are also a lucrative source of income for many officials.

"The central government will say things to please the popular mood, but local governments have way too many vested interests in the property market to make major changes," said Ding.

Property prices have risen almost constantly since China set up a commercial housing market in the late 1990s, allowing families to buy, at deep discounts, the low-rent government-owned apartments they were living in.

Since then, real estate has burgeoned into one of the country's biggest drivers of growth, a creator of vast numbers of jobs in construction and related industries and — as elsewhere — a source of much of the country's wealth.

Rising housing prices have benefited many. But younger Chinese hoping to replicate their parents' homeowner lifestyles, and the legions of rural Chinese now moving to the cities, are priced out of the market.

Yang says she broke up with her boyfriend over the issue, fretting that a huge mortgage would be too great a burden for a young family.

A flood of bank lending meant to fend off recession pushed property sales up 75 percent to 4.4 trillion yuan ($644 billion) last year, making China the world's biggest property market, by some estimates.

"I really have no idea of what to do about housing prices. Unless you get help from your parents or earn more than 500,000 yuan ($73,000) a year, you can't afford to buy," said Shen Junlong, a 29-year-old IT manager at a company affiliated with Shanghai's Baosteel Group.

"Living costs are always higher than what you can put in the bank," said Shen, whose 160,000 yuan ($23,530) annual income is about four times the national urban average.

Sales volume has slowed in recent weeks following the government's latest market-cooling measures but prices continued to rise. Real estate agent Century 21 reported deals in Shanghai averaging 15,000 yuan ($2,200) per square meter in February.

In Beijing and Shanghai, residential prices soared to an average of more than 12,000 yuan ($1,700) per square meter, double the level three years ago, according to a December report by U.S. bond manager Pimco.

Expensive luxury units account for the bulk of sales; Pimco estimated that only 10 percent is to the mass market.

On the tropical island of Hainan, a resort and golf-course building boom has pushed prices still higher.

Given China's huge 1.3 billion population, scarce land and rapid urbanization, prices are bound to rise. But the skyrocketing prices of the past few years have many accusing property developers and local officials of hoarding land and properties so they can sell them later at higher prices.

Meanwhile, aspiring home owners like Yang find themselves outbid by wealthier buyers who snap up apartments so as to "flip" them for huge profits as prices rise.

To discourage such speculative buying, regulators have raised bank reserve rates and adjusted other policies affecting land and housing sales.

But broader moves are needed to reduce risks from property investments made without regard for potential returns, says Tao Wang, an economist at investment bank UBS. She puts the potential for nonperforming loans over the next few years at 2.5 trillion yuan-3 trillion yuan ($367 billion-$440 billion).

"It is critical for the government to manage its macro policy and urbanization process now to avoid runaway lending, investment, and a big land-property related bubble," she wrote in a recent report.

Most analysts say China is unlikely to face the kind of U.S.-style credit implosion that touched off the global financial crisis.

Residential mortgages here are relatively low risk, given the high required downpayments. Chinese banks have barely dabbled in the types of mortgage-related financial derivatives that triggered the U.S. property meltdown, and levels of debt remain low compared with many other economies.

Yet with prices stalled at untenably high levels, public angst over out-of-reach housing shows no sign of abating.

The government has repeatedly pledged to ensure a greater supply of so-called "economy housing" and is expanding programs to provide subsidized rental housing to low-income families. But the agenda does not include basic reforms, such as a property tax, that might help counter the market's tendency toward frothing into bubbles.

Fed up with haggling over prices she can't afford, lawyer Ling Junyi gave up and moved to Singapore.

"My salary is not bad, compared with other Shanghainese my age, but if I want to buy an apartment it is impossible, or very, very hard," says Ling.

Singapore's housing is also pricey, but interest rates there are lower, and salaries higher, she says.

"I don't want to be a slave to my house," said Ling. "I want an apartment of my own, but in Shanghai it's just more than I can afford."

 

3 good articles for Wednesday March 17th, 2010.





China in ‘Greatest Bubble in History,’ Rickards Says (Update1)


By Bei Hu

March 17 (Bloomberg) -- China is in the midst of “the greatest bubble in history,” said James Rickards, former general counsel of hedge fund Long-Term Capital Management LP.

The Chinese central bank’s balance sheet resembles that of a hedge fund buying dollars and short-selling the yuan, said Rickards, now the senior managing director for market intelligence at McLean, Virginia-based consulting firm Omnis Inc.

“As I see it, it is the greatest bubble in history with the most massive misallocation of wealth,” Rickards said at the Asset Allocation Summit Asia 2010 organized by Terrapinn Pte in Hong Kong yesterday. China “is a bubble waiting to burst.”

Rickards joins hedge fund manager Jim Chanos, Gloom, Boom & Doom publisher Marc Faber and Harvard University professor Kenneth Rogoff in warning of an overheating and potential crash in China’s economy following a rally in stocks and property prices. The government has raised lenders’ reserve requirements twice this year to cool an economy that grew at the fastest pace since 2007 in the fourth quarter.

Leveraged speculation in the stock market, wasteful allocation of resources by state-owned enterprises, off-balance- sheet debt through regional governments and the country’s human rights record are concerns, said Rickards, who worked for LTCM between 1994 and 1999, helping negotiate a $3.6 billion rescue after the hedge fund lost $4 billion in a few weeks in 1998.

“Take Russia and China together, neither of them is really deserving any investment” except for short-term speculation, Rickards said. India and Brazil are two of the “real economies” among the developing countries, he said.

U.S. Treasuries

Rickards also disputed an argument that China could hold U.S. policies hostage through its U.S. Treasury securities holdings. The Asian nation remained the largest overseas owner of the debt after trimming its holdings by $5.8 billion in January to $889 billion, according to Treasury Department data released March 15.

China would suffer massive losses if the debt was dumped, reducing the funds available in the U.S. securities market and forcing the prices lower, he said. The U.S. president also has the authority, rarely used, to freeze such positions, he said.

Harvard’s Rogoff said Feb. 23 that a debt-fueled bubble in China may trigger a regional recession within a decade, while Chanos, founder of New York-based Kynikos Associates Ltd., predicted a slump after excessive property investments.

China’s economic growth rate quickened to 10.7 percent last quarter, driven by a record 9.59 trillion yuan ($1.4 trillion) of new loans last year and 4 trillion yuan, two-year stimulus spending on railways, airports and homes.

Slowing Growth

Bank loans slowed to 700 billion yuan last month, after lending surged in January more than the previous three months combined, central bank data showed. Growth of the broadest measure of money supply, or M2, slowed for a third month to 25.5 percent in February from a 29.6 percent gain in November, the quickest pace in more than a decade, government data show.

China’s property prices rose at the fastest pace in almost two years in February, adding urgency to the government’s efforts to rein in speculation and increase the amount of affordable housing. Residential and commercial real-estate prices in 70 cities climbed 10.7 percent from a year earlier, the statistics bureau said March 10.

The Shanghai Composite Index surged 80 percent in 2009. Its members are valued at an average 17.4 times current year earnings, compared with 14.9 times for the U.S. benchmark S&P 500 Index.

China’s stocks aren’t in a bubble and will gain by the end of the year as the government takes measures to prevent the economy from overheating, Bob Doll, BlackRock Inc.’s chief investment officer for global equities, said in an interview this month.

Antoine van Agtmael, who helps manage $13 billion as chairman and chief investment officer of Emerging Markets Management LLC, said this week that while there are signs that the nation’s real estate prices may be excessive, the stock market isn’t in a bubble and China is unlikely to face “chaos” or experience a hard landing.

Van Agtmael, who coined the term “emerging markets,” made the comments in an interview with Bloomberg Television.