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Chinese Real Estate Bubble Pops: Beijing Real Estate Prices Plunge 27% In One Month
Could the Chinese monetary tightening be working? The National Bureau of Statistics has released its latest food price update for the period April 1-10, which shows that while most foods continue to rise modestly, several food products have plunged particularly cucumbers and rapes, both falling 8.8%, kidney beans 6.3% and kidney beans down 6.3%. Yet this is nothing compared to what is happening to Chinese real estate: it appears Chanos' long anticipated property bubble may have popped... but the supersonic boom is so loud that nobody has heard it yet.
From Market News:
Prices of new homes in China's capital plunged 26.7% month-on-month in March, the Beijing News reported Tuesday, citing data from the city's Housing and Urban-Rural Development Commission.
Average prices of newly-built houses in March fell 10.9% over the same month last year to CNY19,679 per square meter, marking the first year-on-year decline since September 2009.
Home purchases fell 50.9% y/y and 41.5% m/m, the newspaper said, citing an unidentified official from the Housing Commission as saying the falls point to the government's crackdown on speculation in the real estate market.
Beijing property prices rose 0.4% m/m in February, 0.8% in January and 0.2% in December, according to National Bureau of Statistics data.
The central government has launched several rounds of measures since last year designed to cool the housing market, though local government reliance on land sales to plug fiscal holes mean enforcement hasn't been uniform.
The only question is how much actual equity buffer was used in these purchases. For all intents and purposes a drop of this magnitude levered even 2 times (assuming 50% or so equity down) means that China is on the verge of a complete bubble implosion. If the pummelling in the Beijing real estate market shifts to other cities not only is the Chinese tightening regime over, but the SHCOMP in the next few weeks could get very interesting as people understand the world's biggest marginal bubble has popped.
h/t Robert
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another collapsed market? uranium stocks. the japanese crisis has take companies down 50-70%...if those aren't bargain sales, I dont know what is: http://www.youtube.com/watch?v=f-EkkhJi9VY
tek, perhaps Uranium as a fuel source is dead? Except for .gov use?
I think so and that sector may never really revive.
ORI
What's the alternative ORI? The vast majority of people here were crying the sky was falling during the BP spill--writing about mass evacuations and Corexit. Where are BP, RIG and APC trading now? 50-150% higher. Tek is on the right track.
Anybody want to buy a Bentley? Apparently there's fucking loads of 'em going cheap in Beijing...
Thunder D, not sure if you are following the GOM story on alt. press, because it's pretty dam bad. Stocks may be up, but this is the most manipulated market (especially the past year, since GOM began, coming up to the anniversary actually).
And th ealternatives...hmmm, if I point them out, the naysayers come screaming out of the woodwork. ;-)
Try this when you have time at hand...
http://aadivaahan.wordpress.com/2010/12/31/a-big-part-of-what-this-here-place-is-about/
No one is ready to get off the oil/cheap energy bandwagon...yet.
ORI
Ori,
You are a strange mix of oriental mystery and occidental pragmatism.
Being an oriental makes you a proponent of Holistic solutions.
Being an occidental makes you also a practitioner of reductionist actions.
Untie the Gordian knot or cut it; the world waits for would be inventors cum entrepreneurs to become practitioners. Biting the bullit is the acid test. But then timing is of essence to find the tipping moment to produce the best holistic effect from a reductionist proposition.
Hopefully, a realistic contract to build prototype or test a theoretical model not an impossible compromise of principles...I understand the dilemma brother, only to well...I hope the 'solution' is worth the voyage as lonely prophet in his desert trek.
Falak, looks like the visionary's dilemma is familiar to you.
They say that when you are granted a vision, you are usually also granted the energy to see it to fruition and the discernment to know a mirage from reality in that desert.
I'm not sitting on my hands, always doing and un-doing. People are startign to appriach with open hearts and minds. I know that the motive for profit cannot be in the mix at the start.
Timing is really everything. So I play music, and watch.
your turn of phrase and in-sight is much apreciated.
ORI
Alternative? Thorium.
"Prices of new homes in China's capital plunged 26.7% month-on-month in March"
LOL. Can you imagine a similar plunge in Washington DC prices after Bernanke exits QE?
Exactly.
BJ housing prices (good locations) were either flat or even slightly higher.
You've posted the same garbage on every other thread. Begone, troll!
But this information is from the Chinese government. Therefore I highly doubt it
let the boom continue then...
I'm with you Herr eigenvalue.
My cynical self thinks the inflated chinese gold production figures over the past few years is for the purpose of not making the price explode, which in turn is for the purpose of chinese private & official accumulation.
My other cynical self thinks the recent chinese trade deficit figures release, and this latest release is to help provide plausible deniability to claims that the Renminbi should be revalued upwards, but instead be devalued against the USD downwards, due to a trade deficit & "now" plunging real estate values.
Nothing is coincidence in this game.
"kidney beans down 6.3%..."
but kidney's are up 235%, ice is up 73%.
http://www.youtube.com/watch?v=0h7V3Twb-Qk
old video but none the less Ordos' are everywhere.
I thought most chinese investment property purchases were all cash...?
That was what you were told by the China pumpers. The 60% down payments applied to individuals buying a "second home" (read "apt to flip").
http://online.wsj.com/article/SB1000142405274870329320457610587309465935...
But commercial purchasers (and who else would buy an entire apt building, office tower or condo complex?) were never subject to those restrictions. So the Beijing and Shanghai bubbles were bid up at the commercial level. Further, the foreign money took on its leverage outside China; much of it was leveraged investment fund money.
Chanos 1, Rogers 0
Its all shark loan schemes. Invisible banking.
http://globaleconomicanalysis.blogspot.com/2010/07/ponzi-shark-loans-fue...
Families lend, friends lend, and they all rely on each other for cash reserves. The ties of honor and reputation are all that enforce repayment. It is a great shame if you can't repay. Face is everything. Many simply repay by "rolling the debt" borrowing more to pay the vig.
I have had to bail my mother-in-law out several times. The accumulated interest was greater than the principal she originally borrowed.
Parents of lend to their children to buy their condo with the understanding it will be repaid or they will come to live in their old age under that roof. Almost no one has the 20 to 30% down to buy a place. The down payment is typically borrowed at terrible interest or comes from a "marriage gift" which had its origin in borrowed funds, not from savings.
It's like fractional reserve lending on steroids. Everyone works their ass off to pay the loan, pay the vig, and save their face so they can borrow more if needed. A collapse of the bubble could cost lots of folks their life savings. This makes the financial aspect of Chinese society much more fragile than it appears on the surface. There is a lot of interconnected personal debt below radar.
makes subprime seem quaint in comparison...
Another one of my "Nine 2011 Predictions" is becoming true:
5. The Chinese real estate market, the last investment vehicle in China for those Chinese with money, will also begin its collapse suddenly, hitting hard cities like Shanghai, Beijing, Fuzhou, etc. According to a very recent article by UK's Daily Mail Online, there are as many as 64 MILLION empty homes in China with no one occupying these brand new homes! This China real estate crash will have serious implications for the real estate market in Vancouver. There won't be m/any Chinese millionaires plunking down $1+ million CASH for buying real estate in Vancouver, as has been the case over the recent years.
http://rense.com/general92/stdr.htm
were these 'Nine 2011 predictions' made in er 2011 by any chance?
wasn't difficult to see that one coming...
I also predict that it will either rain, there will be a financial calamity, a nuclear power plant will blow up or it will go dark tonight...
I too have a 100% success rate in making predictions.
Question is, 'How far will Chinese house prices fall, and when will they stop falling?'
We'd all like to know when the global economic expansion will take off again. If you can predict it, perchance...
If you read the full article (PDF), it was published on December 23, 2010.
As to your last question, GD2 or Great Depression 2 won't end until we are through with WW III or WW IV, because that's the last bubble to inflate (pun intended).
+10
ahhhhh....now we see why The Goldman moved on that copper downgrade. We also probably know why the commodity trade unwind more broadly has begun.
Rapes down 8.8% and noboy's heard it.
Such delicious typos, layered.
Sad to report that the Indian RE bubble bubbles on, every "rent" in the bubble's fabric being papered over by more "foreign" money.
We have REMax selling houses here now! Why? And LJ Hooker? The irony is not lost on me.
ORI
http://aadivaahan.wordpress.com/2011/03/26/spinal-tap/
Spell check will never replace careful proofreading.
Neither will it replace actually checking the source information. Go ahead. Click. Let us know what you find.
I think you may have missed the point of that comment entirely Tyler...
Get your Chinese Rape Pellets here...
http://shunkang.en.supplierlist.com/product_view/shunkang/101585/101030/Rape_Pollen_Pellet.htm
how can anyone's cucumber be down? this is wonderful!
Having been born in the UK and raised in North America, I would go back to the UK for the summer during my school days. I was a taken aback one day when driving out in the countryside my Grandmother said something to the effect of the rape was looking lovely in bloom.
I think its flax seed in North America.
canola.
http://en.wikipedia.org/wiki/Canola
Canola....
And in Dutch (or Flemmish at least) rape(n) are turnip(s).
Nice to hear that turnips are now affordable by the masses again then...
Learn something new every day.
My bad.
absofuckinlutely old stick...
Just hate those high beta houses...
what high beta houses...
The high gamma houses are worse.
Isn't this what should have happened in the US?
coming to a house near you...
Tek, stop buying the paper stocks..buy the Uranium itself..but remember you can't eat uranium with out getting a hot ass.
Yellow cake.
psst, got some nice glow-in-the-dark fish going cheap...
big discounts...
very good quality, much cheapness...
from Japan.
Looks like Bernanke inflated the wrong RE market.
Now that's funny. And too true.
lol! USA exports rule! try to beat america in a race to the bottom ya commie bastards! go ahead, make our day!
i've said it before and i'll say it again: our banksters will kick chinese ass til the kingdom cometh. new BRIC reserve currency? okey dokey! just revalue the fuking yuan upward like we told ya in the first place & shut tf up!
no one trusted their gdp cpi or trade data, so why shud we trust their real estate numbers? Yes "rapes" are down, but what about corn flour and most significantly rice prices? anyone been to Shenzhen or chongqing within the last 4 weeks? Petrol prices will produce another second round effect, and that cpi 5.4% leaked number from phoenix, that is pure bunk.
The multiple Tyler Durden contributors seriously need copy editors. Significant decline in readability noticed the past few weeks. How 'bout reading what you write at least once before posting, eh?
What exactly do you have a problem comprehending?
It's just how poorly written everything has become. I like the rants, yes, but having to re-read things because of poor grammar/spelling/sentence construction is just beyond annoying. It matters to some of us to know these things aren't being written by sixth graders. If you can't swing it, don't use it.
While everyone appreciates the specificity of sweeping generalities, please indicate which sentence you are having the most trouble with.
Or there is Yu Choy...also known as edible Rape...
http://www.evergreenseeds.com/edrapyucho.html
You can't read a sentence with an unnecessarily capitalized letter, or a repeated clause?
Or are we just bitching to bitch?
Sorry, posted my reply to Tyler outside the thread (below). No, it's the accumulation over the years. I also don't give a crap if everyone on the site forum junks me to oblivion for mentioning it. Most of the junkers write like shit as well.
And yes, perhaps you're right - bitching just to bitch. Some of us Aspie-types can't stand horrible writing when it dulls the point, even if it is on a blog like ZH.
hello moron... rapes and kidney beans are actual foods. click on the source link dumb fuck
Well, since it was Mr. Q and not me that you were replying to, in his defense: he is actually closer to being correct by assuming it was Grapes, as it would be very unusual for any country to be quoting the price of "rapes". It is likely a subtle translation error on the Chinese report. "Rapes" is a term uncommonly used outside of the wine industry, which are the leftovers from mashing grapes in the winemaking process. Rape, on the other hand, is a type of cabbage that is sold and quoted globally, right along with rape seed oil (also quoted on the Chinese stat sheet), derived from... wait for it... rape, not "rapes".
I think we all know what kidney beans are, but there was no need to duplicate it in the text, that's all.
I'll leave it up to your superior intellect to determine who is dumb or is a moron here.
thanks!
Personally, I find the skewed grammer and occasional misspellings charming. Makes me think these guys are financial geeks, not professional journalists. Fits right in with the philosophy of the blogosphere.
TPOG
'Cucumbers and rapes' Tyler...man I do NOT want to be in China!
Hmm... junked once within 60 seconds of posting. Must be one of the other Tylers that posted the story. I'm certain it's not Dan, because what I saw him writing on ZH a couple years ago was a bit more carefully written than this.
Mcteague, You should blog at Merriam-Webster website, the very hot and luscious Emily Brewster states in one of her vids " A preposition is an appropriate kind of word to end a sentence with" ; "if it feels good go with it", no i did not junk you but I am now
The difference is if I did blog, I wouldn't need Merriam-Webster or Emily to turn to for help.
Junk away. Doesn't bother me a bit. :)
Bah, verbogeny is one of many pleasurettes afforded a creatific thinkerizer.
That's great, but the thing is that the money propping up this bubble all came from so called "shark banks", which are grey market at best, and you can bet your ass that they won't be bailed out.
I would expect prices to fall dramatically in their housing market, but the impact on the wider economy will likely be short lived, perhaps a year at most, unless they do something stupid, like try to reflate the property bubble, or bail out the illegal banks. Of course, they might use this as an excuse to divest themselves of their forex reserves. Pray that they do not.
Of course, they might use this as an excuse to divest themselves of their forex reserves. Pray that they do not.
Usually I agree w you, TMosley. But am not at all sure I agree w this sentiment. Time to face reality.
And what happens if just a fraction of the physical dollars that circulate out of the US come back to bring the inflation back home?
What do you disagree with? It sounds like we agree on the facts.
I don't want to see hyperinflation on these shores. I'm almost certain we will. I have positioned myself to profit so that my family, my neighbors, and I can survive it. That doesn't mean I want it.
Assume these numbers are lies, manipulated to configure to whatever the party line happens to be.
If inflation needs to be brought down so that 'the People' can eat, then brought down it shall be. If residential RE must 'POP' then voila.
No one massages numbers like the Mandarins. Remember the Great Leap Forward? The Potemkin Villages and stalks of corn planted along the road for Mao to drive past?
Real estate has been rich tax resource for local governments. Chinese real estate has kidnapped local governments and banking to serve for them. The housing prices have been ceiling high in all cities of the country.
Complaints are huge and everywhere.
In this case, central government had to figure out something in order to keep so called harmony. First tepid attempt failed. Second failed. Third failed. Central government showed incompetent. And then, it cames the toughest restrictions. Beijing is the only city which local government has announced that housing price of this year will be controlled lower than that of previous year. There is no spread effect. Because the other cities only target to limited price up no more than 10%.Are Chinese real estate bubbles? Surely yes. Will bubble burst? It will but not now or not in next three years.
"The only question is how much actual equity buffer was used in these purchases. For all intents and purposes a drop of this magnitude levered even 2 times (assuming 50% or so equity down) means that China is on the verge of a complete bubble implosion."
The notion of large downpayments is in part, a myth. To what degree is difficult to say since it comes from the Trillion dollar shadow banking system. This consists of your run of the mill Loan Sharks backed by organized crime, public auctions for land flipping capital at the local time square, to the unregulated and illegal thousands and thousands of "Trusts" that gather money from people to lend cash, to the Banks prepackaged wealth managment product. All of these loans are backed by property, as something like 80% of Chinese already own at least one.
The auctions are a fascinating scene to watch (there are youtube videos), where people bid up to 5% a month for bags of cash to go put down on property. Property is used as collateral, same with the loan sharks. The Trusts are made up of people with cash, who then loan it out to flippers, allegedly receiving guaranteed payments in return - again backed by the property. The wealth managment products sold by banks to customers, are backed by land as collateral.
So it's not cash, but other inflated property and land that is behind the downpayments from buyers and the loans taken out by property developers.
Really, does it make any sense that a country that has people with an average income of $4000 can put up 30-50% cash from savings on a 150k condo?
Sounds like a complicated Ponzi scheme, but a Ponzi scheme nonetheless!
"The National Bureau of Statistics has released itslatest food price update for the period April 1-10, which shows that while most foods continue to rise modestly, several food products have plunged particularly cucumbers and rapes, both falling 8.8%, kidney beans 6.3% and kidney beans down 6.3%."
>> The National Bureau of Statistics has released its latest food price update for the period April 1-10, which shows that while most foods continue to rise modestly, several food products have plunged. Specifically, cucumbers and grapes have both fallen 8.8%, with kidney beans down 6.3%.
More recently: "The BLS beat the expectations game continues." ?? I don't even think you could make sense of that one.
I could keep digging up past issues, but I don't have that much time on my hands. I also recognize that ZH is a fast-moving, up-to-the-minute blog, but shit — it doesn't take much to proof something for comprehension or readability. Thanks.
I.e. you prefer correctly worded lies (Teleprompter in chief anyone?) over occasionally misspelled hard truths. You think function should follow form.
Do yourself a favor and look for a different blog.
Butchery of the language serves only to butcher the message. The greatest lessons in history have taught us that form is function, malek.
Might want to shelve the spite for a better target than me.
govt lies, no way it has dropped that much. there would have to a devastating incident to produce that number.
C
If a black swan event happens behind a Chinese Wall....do American banks die because of it?
I hope so!
newly-built houses? location matters?high-end apartment cannot get license to sell, that's why price plunged
China is the house of the ultimate Keynesian experiment. A real central govt. controlled economy with a total coordinated view on fiscal AND monetary levers, a docile labor force and a mercantile economy that can switch from export oriented product manufacture to starting to dig pot holes and infrastrucutre at the drop of a hat, if the export market collapses. Labor force flexibility at a price advantage and hourly productivity which is stakhanovite. Can't lose for a central planning Keynesian economist. Let's see if they beat the shits out of this Corporate Ponzi called the USA Oligarchy which only knows one God : that of eternal debt, living off the coat-tails of other people's near worthless labour.
sorry dupe
sorry dupe
+1000 yuan
http://nirnadler.files.wordpress.com/2008/11/your-god1.jpg
http://www.youtube.com/watch?v=7Lwlx3GnLGs
"plunged particularly cucumbers and rapes"
Was the symbolism of this intentional Tyler?
Cucumbers being phallic, and rapes instead of grapes.
I question the large drop in Beijing real estate prices. But if it did occur since February's data was released, it would be significant.
A search for "housing" at http://www.stats.gov.cn/english/ gives a link to "Sales Price of Residential Buildings in 70 Large and Medium-Sized Cities in February, National Bureau of Statistics of China 2011.03.22 13:28:22" at http://www.stats.gov.cn/was40/gjtjj_en_detail.jsp?searchword=housing&channelid=9528&record=1 .
No large drops in housing prices were apparent to me.
Fake news.
High real estate price is part of China's strategy. The political class is already fully invested. They'll print money to sustain it if necessary.
Modest temporary drops in a few isolated cases happen all the time. But collapse it won't. A 27% decline across the entire city of Beijing in one month is simply impossible.
The fake news is basically local government in Beijing telling the national government that it has responded to public outcry and lowered house prices, when it really hasn't.
http://www.hturning.com/index.php?action=topic&id=47
http://www.hturning.com/index.php?action=topic&id=44
Gee, it's about time!
Maybe somebody posted one of those newscasts where reporters walk through totally empty new cities built for millions on an internet site that was not blocked by their commie masters.
Let's see how much the peons like losing 25% of their investment every year... or month?