Chinese Home Prices Decline In Record Number Of Cities, Average Sale Price Has Biggest Drop Since LehmanSubmitted by Tyler Durden on 07/18/2014 09:00 -0400
China’s new-home prices fell in a record number of cities tracked by the government as developers cut prices to boost sales volume. Prices fell in a record 55 of the 70 cities last month from May, the National Bureau of Statistics said in a statement today, the most since January 2011 when the government changed the way it compiles the statistics. What's worse, and as can be seen on the chart below, prices in Shanghai and the southern city of Guangzhou fell 0.6 percent each from May, the biggest drop since January 2011, while they declined 0.4 percent in Shenzhen. Prices fell 1.7 percent in the eastern city of Hangzhou, the largest monthly decline among all the cities. At the national level, China recorded a 0.48% sequential decline in home prices: the largest since at least 2010. And slamming the nail in the Chinese housing market, at least for now, is that the Average Sale Price dropping by 1.5% Y/Y, the biggest drop since Lehman!
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When we broke the story of China's "secret" money laundering into US real estate scheme, we said "So what happens next? Assuming there is the anticipated resulting backlash and crackdown on Chinese banks, which will finally enforce the $50K/year outflow limitation, this could well be the worst possible news not only for Chinese inflation, which suddenly - no longer having a convenient outlet for the unprecedented liquidity formed in the country every month - is set to soar, but also for the ultra-luxury housing in the US. Because without the Chinese bid in a market in which the Chinese are the biggest marginal buyer scooping up real estate across the land, sight unseen, and paid for in laundered cash (which the NAR blissfully does not need to know about due to its AML exemptions), watch as suddenly the 4th dead cat bounce in US housing since the Lehman failure rediscovers just how painful gravity really is." What we forgot to add is that virtually every other financial mainstream outlet would promptly pick up on the story even as the original source back in China took its secrets to the grace. Metaphorically speaking, we hope...
Now that the World Cup is over, and following last week's global macro reporting slumber (aside for the Portuguese risk flaring episode of course), things pick up quite a bit in the coming week. Here are the key events.
Another round of overnight risk on exuberance helped Europe forget all about last week's Banco Espirito Santo worries, which earlier today announced a new CEO and executive team, concurrently with the announcement by the Espirito Santo family of a sale of 4.99% of the company to an unknown party, withe the proceeds used to repay a margin loan, issued during the bank's capital increase in May. This initially sent the stock of BES surging only to see it tumble promptly thereafter even despite the continuation of a short selling bank in BES shares this morning. Far more impotantly to macro risk, it was that 2013 staple, the European open surge in the USDJPY that has reset risk levels higher, while pushing gold lower by over 1% following the usual dump through the entire bid stack in overnight low volume trading. Clearly nothing has been fixed in Portugal, although at least for now, the investing community appears to have convinced itself that the slow motion wreck of Portugal's largest bank even after on Sunday, Portugal’s prime minister said taxpayers would not be called on to bail out failing banks, making clear there would be no state support for BES.
"To make this perfectly clear, extreme views on the left or the right end up meeting in the same back parking lot where they agree the people are the great unwashed and are too stupid to see they need to be manipulated and controlled." The people behind the curtain do not change with the change between left and right up in front of the curtain. It is always about power regardless of the side of politics.
America, Europe or Asia: those are the usual continental suspects which come to mind when asked where the world's most expensive cities for expats are located. They are also incorrect. According to the most recent study conducted by Mercer consultants not only the world's most expensive city, but also the second most expensive place for foreigners to live at this moment, are located in the one continent which we predicted two years ago, would become a Chinese colonial feeding ground. Africa.
This clown parade of clueless opinions (did we mention Goldman had BES at a buy until this morning?), stretched all the way to the very top with Bank of Portugal itself issuing the following pearl:
- BANK OF PORTUGAL SAYS BES DEPOSITORS CAN STAY CALM
Uhhh, what else would the Portugal central bank say? Panic and withdraw your deposits from a bank whose exposures to insolvent entities have been largely unknown until today (and even now).
But... but... the VIX said everything is ok, and European rates were the lowest they have been in centuries... How can something possibly go wrong?
It just did.
Now that even that bedrock of the Keynesian voodoo religion, the Gross Domestic Product calculation, has become a ridiculous farce, with everyone in Europe suddenly adding the uncalculable "contribution" from drug dealers and hookers all in a mad dash to make debt/GDP ratios appear better than they are, it is truly time to unleash the clowns as none other than the country which has taken fabricating economic data to an artform, no not the US for those confused but China, is preparing to change the way its calculates its GDP, with the biggest contribution coming from, hold on to your hats, R&D. One wonders if "reverse engineering" of pirated products and services is covered in this "non-GAAP GDP" category. The end result? GDP for the country which cumulatively will be several percentage points higher once the entire fudging/recasting exercise is completed. Here are the details.
While Spain may have been scrambling for the past several years to figure out how to spin its economy, boasting one of the highest unemployment rates in the Eurozone, as recovering, coming up with numerous changes to what it believes should constitute GDP, most recently including an estimate of the contribution hookers and blow add to the economy, a surprising place which has emerged as a potential source of huge economic upside for Spain's economy is none other than the recently established Islamic State created by the ISIS al-Qaeda spin off. Because, stunningly, in a story right out of a history book covering the Islamic Conquest and subsequent Reconquista (however not in the middle ages but in the 21st century), the hardest-core Islamists around, those which even al-Qaeda deemed too "extremist", appears to have sworn to invade Spain next!
The US and UK are the 'best' performing world economies based on PMIs. Despite slumping real incomes, surging gas prices, a dismal Q1, fading Q2 growth expectations, and the US being the worst relative performing macro-surprise index in the world this year, it is the cleanest clean shirt with the great expansion based on soft-survey data. France joins Korea at the bottom of the global pile of macro-economic performers with Russia, Brazil, Australia, and Greece also in contraction. Here is your 1-stop-shop guide to global macro - USA USA USA...
All around Asia, PMIs are tumbling. The last few days saw a number of nations' manufacturing PMIs drop with the notable miraculous surge in China (at 2014 highs). Tonight saw the Services PMI side also tumbling with Australia first (at 2014 lows) and Japan fade back to 49 for its 3rd month in contraction. But (unlike the manufacturing side) China 'official' Services PMI faded from its rebound (55 vs 55.5). The drop in Services PMI makes some sense given the 8-month lows in employment indices within the manufacturing PMIs... But then the baffle 'em with total bullshit brigade arrived as Markit/HSBC unveiled their version of Services PMI which jumped to 53.1 - its biggest MoM on record - makes perfect sense.
The holiday shortened, and very busy, week includes the following highlights: [on Monday] US Chicago PMI; [on Tuesday] US ISM Manufacturing, Construction Spending, and Vehicle Sales, in addition to a host of PMI Manufacturing in various countries; [on Wednesday] US ADP Employment, Factory Orders; [on Thursday] US Non-farm Payrolls and Unemployment, MP Decisions by ECB and Riksbank, in addition to various Services and Composite PMIs; [on Friday] US holiday, Germany Factory Orders and Sweden IP.
A thumbnail sketch of the main events of during the week ahead.