Very Very Very interesting info on China's Real Estate market! Bubble?

Discussion in 'Economics' started by S2007S, Mar 7, 2013.

  1. S2007S


    About a year ago or so there was a few videos going around about ghost malls in China, this one takes it to a new level and beyond....why this is going ignored is beyond my comprehension, just like BUBBLE ben bernanke laughed at the housing bubble back in the day as if it didnt exist the same thing is happening again, this time its in China and once this bubble bursts its going to be felt everywhere.....

    seems to me they are just building to build, only way to keep their GDP growing is to keep producing, and producing they are....

    I have read that construction in China accounts for just about half of China's $8 Trillion economy, now once that slows, that nice 7-8% GDP growth rate that used to be above 10% not too long ago will probably fall to under 5% and once the RE bubble in china bursts it will take most of the world economies with it including the US...once again BUBBLE ben bernankes cheap easy money policies and the trillions of dollars that has been pumped into the US economy has created these problems world wide. China had a stimulus of their own of around $500-$600 US Billion back a couple of years ago. You know they needed to stimulate their economy just like the rest of the global economies cause the only for an economy to function today is with cheap worthless dollars!

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  2. heech


    I do think there's a real estate bubble in China, and many speculators + developers will be hurt when it finally corrects.

    But that said, I think it's a minor story at best, and will absolutely NOT emulate what's occurred in the Western economies in 2008. The conditions on the ground are simply vastly different. The marginal American home buyer in 2008 was paying 0% down, and had very poor repayment capability. They were speculating on price increases, nothing else. When prices dropped, they walked away, banks dumped foreclosures at dirt-low prices, and the effect cascaded.

    In China, the marginal home buyer is still paying at least 50%+ down in order to purchase these properties. The vast majority have the ability (and intention!) to pay the debt they're taking on. They're purchasing because they are looking for a "safe" place to store retained savings.

    What happens when prices finally go into a prolonged decline? There is no advantage to dumping these properties. Instead, their owners have every reason to wait (in order to preserve their 50% equity) for a rebound. And in the mean time, older properties will inevitably end up in the rental market for new urban migrants.

    So, these owners will certainly be paying the price for buying at the height of the bubble (as they will probably have negative IRR on their savings for 10-20 years)... and that might lead to other social/political issues. But as far as widespread economic depression mimicking American affairs post-2008... look into the details of what's going on here. It simply doesn't register.
  3. ktm


    It will crash.