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At Least 6 Chinese Cities Have Bailed Out Their Real Estate Markets In The Last Month
Submitted by Simon Black of Sovereign Man blog,
According to the Chinese financial publication Securities Daily, emergency real estate rescue packages have been launched in large cities such as Wuxi, Nanning, Hangzhou, Tianjin, Tongling and Zhengzhou in the last month alone.
“Zhengzhou created a mortgage guarantee policy to win back banks’ confidence” according to the story.
Further, “if a borrower does not fulfill the loan repayment obligations as agreed in the contract, the guarantee institutions will have to repay the housing loans…”
What a surprise– a government guarantee.
The market is imploding and defaults are going through the roof. Property vacancy rates in Zhengzhou are an astounding 23%. So the government is putting taxpayers on the hook.
The article goes on: “A legislative affairs official of Zhengzhou revealed to the media that this was the first time for Zhengzhou to carry out such individual housing loans guarantee policy.”
In other words, the government is panicking.
Home sales in China fell last month by 18%, in no small part due to tightening credit conditions.
Developers have tried to pick up the slack and liquidate inventory by offering no money down deals… their own desperation tactic.
But it’s not working.
Over the May 1-3 holiday weekend, new home sales across China’s 54 largest cities were 47% lower than last year.
The national government in China has all but capitulated, and they’ve turned the reins over to local governments to ‘fix’ the problem.
This has been a long time in the making.
According to data from the US Geological Survey and China’s National Bureau of Statistics that was compiled by the Financial Times, in just two years (2011 and 2012), China produced more cement than the United States produced in the entire 20th century.
Much of this development came from centrally planned monster infrastructure projects– bridges to nowhere, zombie train stations, and infamous ghost cities.
So much excess inventory has built up, a major slowdown was inevitable.
This is a huge issue for China given that housing sales comprised nearly 12% of GDP last year.
Even President Xi Jinping recently stated that his nation must adapt to a ‘new normal’ of slower economic growth.
And like the butterfly that flaps its wings, a slowdown in China has substantial effects on the rest of the world.
I’m seeing this first hand here in Chile; Chile is a huge copper producer, and under high growth conditions, China is a top consumer.
As China has slowed, its copper consumption has fallen. Copper prices have tanked.
Over the past few months, the Chilean peso has lost as much as 20% over its average in recent years. And I can see on the ground, all of this has adversely affected the Chilean economy.
But as I’m fond of writing, in every situation, there are winners and losers.
In this case, my team and I are seeing a lot of attractive deals for agricultural property.
What was once a seller’s market just a few months ago is rapidly turning into a buyer’s market as many indebted owners are dumping their properties. Many are in distress.
Yet due to the slowdown, there are fewer buyers in the market with cash in hand, and I’ve even seen several properties go to auction recently.
For foreign investors, this is a great situation to be in. And I expect that as China’s slowdown continues to unfold, we’ll see a lot more of these types of opportunities all around the world.
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There?
yeah that is a rough error.
it's a friday afternoon ...
The ripple effect from China as a butterfly flapping its wings? More like a dinosaur doing a cannonball into a kiddie pool...
If a tree falls in a ghost city and no one is around to hear it, does it make a sound?
ask the ghost.
Now we have ghost cars to match ghost cities...
All we need are the ghosts, no?
there there....
Repaying your student loan, or paying down your mortgage is so Unfashionable.
And I hate being out of style.
They're there. I'm over here!
Your to picky and you're comments are not understood by those who use Youtube English and some others to. Too think some people frown upon this is to much!
I've noticed their is a direct correlation between they're lack of basic grammer skillz and there deep desire to express themselves. They could of, or even should of, looked up a few words but they didn't. Now, the new spelling is spreading to all American's. Yes, 'Murican's know how to use the apostrophe. Lastly, I've noticed that their is a tendency to use "they're" or "their" when trying to sound sound more official regardless of weather or not it actually correctly expresses there point. Perhaps the whether plays a role? I suppose its possible but few can link it's role conclusively.**
** It's ( I mean its) harder than I thought to write (I mean right) this way.
There there. Words of comfort.
Their ya go ...it's fixed!
....
the hft read this, saw "bailout" and have gone on a buying spree. must kill those 188 spy puts!
good thing it's not their real estate market. that would suck
It is if it's over there!
Especially if its......oh, yeah....can't slip that buy the sharpshooting ZHers. Their much to klever. ha ha.
I'm trying hard to ignore all of this.
.
World Class classy...misuse of 'there' in a headline...
Remember... to be truly global one needs grammar check in adition to spell check and multiple passports.
They're only there if it's their there.
American is so much easier than English,and Simon still can't
spell.
All of Simon's articles can be summarised as follows - "Simon talks his book."
"Simon talks his book."
Who doesn't? Some are just more obvious than others.
Their.
They're over there in their chairs.
Where?
Over their dammit!
The Chinese are dreaming.
Propped up property market is headed for the propellor.
Why do they bother trying to buy Detroit when they are in danger of being turned into one big Detroit themselves.
Actually the use of there is a transposition error by ZH. I just checked the original article.
That's a weight off my mind.
(Incidentally, I spelt "off" as 'of' the first time I wrote this because I'm clever, me.)
All just play money now; over their and over heah.
If stirring up hated of Japan doesn't take people's minds off the collapse, then start a war with Vietnam.
The Federal Reserve Yellen Tapering Stimulus will bring all countries equally debt burden.
Think about that concept...
Here in Australia it is still a sellers market.....
the govt just upped all taxes....the one they missed was land tax........
TAX LAND NOT INCOME U MONKEYS!!!!
Australias real estate market will pop when the gooks stop paying for rocks. Abbott will then slam the door foreign money by withdrawing residency visas.
The man is a moron and will turn tragedy into a farce.
Much of the recent growth in China after 2008 came from a massive 6.6 trillion dollar stimulus program that expanded credit and poured massive amounts of money into the system. This money encouraged expansion and construction with little regard as to real demand or need. Like a plane on autopilot China continued in the direction it had been on.
Now China finds itself in a credit trap. For years the people of China have had the habit of saving much of what they earn but the low interest rates paid at banks has not rewarded savers. With few investment options much of this money has drifted towards housing and driven housing prices sky high. The economic efficiency of credit is beginning to collapse in China and the unwinding of China’s giant credit spree could be very painful. More in the article below.
http://brucewilds.blogspot.com/2014/03/china-and-great-credit-trap.html
So China's bubble has officially popped?