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The "Golden Era" For Chinese Housing Is Over , Warns China's Largest Property Developer
Western strategists and talking heads, we are sure, will know better and continue to pitch China as the renewed engine of growth in the world and that everything will be fine... but when the country's largest property developer says, the "golden era" for China’s property market has passed, adding that "The period in which everybody makes money out of property is gone," perhaps it is time to listen? Of course, we are sure there will be an orderly exit (just as there was in CNY last night which crumbled to 19-month lows) but as China Vanke Co's Yu Liang warns, "the phase where 'whoever buys makes money' is gone."
China's largest property developer warns that China's property bubble is bursting... (via Bloomberg)
The “golden era” for China’s property market has passed, according to China Vanke Co., the nation’s biggest developer, which is shifting its focus to homes for owner occupiers rather than investors.
“The period in which everybody makes money out of property is gone,” President Yu Liang told reporters May 26 in Dongguan, a southern city in Guangdong province. “Vanke will take a cautiously optimistic approach to face the slowdown and target those buyers who need homes for self-use.”
...
“He should have seen some signs since it’s indeed difficult to make money now compared with before,” said Dai Fang, a Shanghai-based analyst at Zheshang Securities Co. “Growth we’ve seen before is no longer possible and you won’t be seeing blossoms everywhere again,” he added, using a Chinese idiom to refer to the property boom seen in every city.
...
The growth in the real estate industry will slow and the phase where “whoever buys makes money” is gone...
New construction has fallen 22 percent and sales, including commercial real estate, have slumped 7.8 percent this year.
Song Weiping, who is selling most of his stake in luxury-property developer Greentown China Holdings and is stepping down as chairman amid a worsening market downturn, told a news briefing that local and central governments were to blame for the industry's problems, having interfered too much in the market.
...Mr. Song said he is tired of operating in an environment in which the market isn't free.
...Mr. Song also vented his frustrations with Hangzhou and other local governments that sell land to developers at high prices and then force them to use some of the land for low-income housing. "How could they expect us to build social (low-income) housing on the same plot of land that costs 50,000 yuan (about $8,000) per square meter? Who would these homes be distributed to?"
"Beijing and Shanghai are the same," said Mr. Song. "Are they trying to kill us?"
And even the average middle-class joe in China is getting it (via WSJ),
"I wouldn't buy another home even with the loosening of restrictions," said Mr. Ye, who bought his first apartment in 2012 for 14,000 yuan ($2,250) per square meter. Now, a developer is offering a comparable home nearby for 25% less.
"I'm a victim of oversupply," Mr. Ye said.
...
Property developers face a view among consumers that Chinese real-estate prices have peaked..."My last offer was 800,000 yuan" nearly a year ago, Ms. Fan said. "I regret not selling then. I hope the market recovers soon."
...
"The downturn this time is more serious compared to 2008 and 2011," said Barclays Bank analyst Alvin Wong.
...
"The very fact that the PBOC had to provide that window guidance means there is a problem," said Xiang Songzuo, chief economist at Agricultural Bank of China Ltd., using industry jargon for central bank jawboning. "Now, what you're hearing from banks' local branches is that 'we just don't think the property is worth that much money anymore.'"
...
"I don't believe that the local governments will be allowed to reverse the home purchase restrictions,"
But still - PMIs were both above and below 50 and US equities are at record highs, so what could possibly go wrong? How can China's real estate bubble be on the verge of collapse with stocks around the world so high? (Remember 2007/8 in the US - who could have seen that coming)... shrugging off fears because Chinese property is not so levered and derivatived as US property was... think again... it is the base collateral for so much of the shadow banking system (along with endless piles of commodities) that if it goes the contagion will be widespread (as well as the fact that overseas speculative leveraged capital has flooded in to this trade and now wth weakening CNY, capital losses are growing on what was a one-way trade for years).
Still don't believe they have a problem?
China: Non-Performing Loans on the Rise pic.twitter.com/H4C7FarSnW
— Michael McDonough (@M_McDonough) May 28, 2014
As we explained in great detail here, the PBOC kicked the hornet's nest and the end of the can-kicking road is nigh.
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Wi tu lo
How many ghost cities does one civilization need?
paid for with paper which will burn. also bought gold with said paper. after the reset, those will be gov't owned assets that will kepp China viable in the "new tomorrow" ... provided we don't nuke the planet.
I've been watching ghost cities for years. So when does the S finally HTF?
This much we do know: Mr. Ye is a victim and Barclays Bank analyst Mr. Wong is dispensing advice.
They heard that from the conductor too.
hory clap
thats it DOW 10,0000,000
Wait, real estate can go down?
Don't worry, we have reached what looks like a permanently high plateau.
I guess the communists who dress in suits instead of those green fatigues have figured out that building empty cities wasn't such a good idea after all.
Stupid fucks.
Going long guillotines and the companies that would export them to china now...
Made in China knife quality steel- break on rubber neck.
I'm sure there'll be no contagion.
There's always Vancouver...
I live in Vancouver. Imagine a commercial vacancy rate rising faster than ever in history, combined with sales of residential falling by 30% since 2012, while prices make their last delusional rise up. Banks are advertising for independent contractor mortgage brokers, while offering 1.99% mortgages.
It's over, and add to this all the chinese who will be liquidating their empty condos downtown in order to pay for their losses in china, and you got a mess. It's estimated that close to 20% of downtown vancouver condos are empty, owned by chinese who think they'll go up in price forever. When it dawns on them they're losing money, vancouver will be the next detroit.
Been to Vancouver recently. Noticed something new decorating unfinished condo hi-rises. Balcony size banners advertising rentals, half of each ad in hieroglyphics, of course. Such sight is common in Asian ghost towns, in Van it's a novelty.
Also noticed that the monthly lease price seems cheap, until you realize they're quoting a bi-weekly payment.
"I'm a victim of oversupply," Mr. Ye said.
No, you're not. You're fucking stupid you fell for it.
"Bubbles are for building and busting at the expense of the soylents."
- Sir Alan Syntax
Hey, Ye Ye. When the music stops, you dive for a chair. otherwise, U. R. Fuked. Instant name change.
Unfortunately a lot of that debt-fuelled subprime credit nonsense has been exported from China to places like Canada. Locals think that the "Chinese" are bringing lots of money, but nearly all of the evidence points to massive bank credit being taken out, often by "Chinese" people as the culprit to high prices. Basically a bubble in wait of a pin to prick it.
Interesting how things work out when someone else's debt is your value.
I wouldn't describe it as massive. Because of different rules for non-Canadian citizens, they often have to pay anywhere between 40-60% down. Which is relatively debt free compared to Canadians, who are I think the most indebted consumers of the G8 now.
And a lot of them, anecdotally speaking, could pay 100% down but they choose not to, because why pay 100% down when you can borow at 4-6% in Canada and still make 10-20% in China.
And Chinese still only make up 15% of Vancouver real estate from what I recall from the last realtor note I read for '13 data. Further, other major cities in Canada with little to no significant Chinese housing buyers are seeing similar housing gains since '08 for other reasons (prairies heavily driven by commodities industry; TO and MTL much more credit driven akin to the USA subprime crisis; etc).
also i forgot to add they're often taking quite low duration mortgages
http://www.cbc.ca/news/business/scotiabank-offers-5-year-fixed-mortgage-...
rates like this is propping up cnd housing for a lot of oil money too though
Time to get a part time job with the DHS.
Its the Chinese that are pumping the London market, many properties have doubled+ from the 2007 peak. I'm not sure if its smart or dumb money but its pretty accepted it's the Chinese trying to hide money from their government.
Hurry up. I need to cash in my Gold at some point soon ;)
Tell him to come to Australia.....we have a bubble that will never burst......
it just keeps going higher and higher......
Chinese students who are studying here are allowed to buy real estate........
So me call uncle up and get em to send oney over and mee likkee buy.....
Mark my words. The next move will not be back to antiques, or Bentleys, or RE somewhere else, or RE in Burma or Ulan Batar. Nor will they retreat back to the yuan.
The next Mongol wave will go where it has not gone before, on street level; into silver and gold. They will buy everything they can find in their homeland then come here for it. Coin shows will become a thing of the past as the Mongols swoop down and buy up entire rooms of it.
So hold tight.
underappreciating the willingness of the politiburo to accept a tumbling yuan to prop up banks. if anything, this would be good for the economy. chinese goods being 'cheap' again is exactly what a lot of the industrialists, who already moved their millions into CAD or USD at sub-6/1 FX, would gladly accept 7/1 or higher again if it meant they moved more exports again. especially now they the russian oil deal, most of the canadian and oil company acquisitions, vancouver real estate, stashing cash offshore is all done. basically, 2008-2011 round two, lots of folks would welcome that.
just wrote this about the misunderstanding of how their IS and BS actually work. actually when they cook the numbers it means the bad debt is also exagerated
problem is a lot of westerners don't really understand the formula they're using for bad debt. individual banks are not reporting bad debt. the CRBC is (which is like our FDIC and FRB combined). they use growth rate of defaulted debt and what the banks report internally to the regulator (not to shareholders).
but just as the banks 'cook' their earnings and bad debt, they also cook their good loans. so when the regs assume 5% bad debt on $100b good loans, the truth is the bank likely only has 60b or 80b good loans, so the 5% of bad debt is actually on 60 or 80 rather than 100, so the bad debt is in truth much lower than expected. but the 5% is also cooked, but when you even out the lower good loans but higher rate of bad loans, it means the real bad loans is actually a lot closer to this 'cooked' number that what you're suggesting.
further, most of these banks purposely under report liquidity because a lot of the cash has been moved to other shells for corruption purposes. but if the bank heads are going to liquidity concerns, they moved the cash back as OBS financial products onto the balance sheet as write-ups or write-downs, because the cash will do little good if their bank goes under and they lose their job. this is already common place in shenzen.
actually, ironically, one of the best reasons why is actually typically a favorite measure of ZH to show how bad things are becoming in China, but recently hasn't seemed to be focused on as much because it's been evening out. i talked about this yesterday actually. we often like to look at electricity in China, but I haven't seen reference on it in a while
http://www.stats.gov.cn/tjsj/zxfb/201405/t20140513_552377.html
the 8th table down is electricity growth up until april and as seen in the bottom bars the average daily outputs have begun to stabilize and bottom out. most of you cannot read chinese so either you can trust me or you can try google an english article that's referenced it. that "bottom out" was reinforced yesterday by Credit Suisse when they issued a note also saying they think China may be bottoming out based on electricity, railway, etc data showing a 'bottom' (though they also said this last year too and it did go down a bit more). so, you can google that if you want confirmation. further, with electricity and railway volume bottoming out (at least over a few quarters), copper is also stabilizing (which isn't to say things couldn't get worse; but it's at least taken a breather). copper is back up about 10% from its YTD lows and china's stockpiles are down almost 13% YTD (and the two are correlated). which isn't to say these things are going to get good -- but it is to say the collateral value is at least stabilizing, if not improving slightly, and will likely continue to improve at least in the short run as demand increases from the relatively quick (compared to the huge stock up last year) depletion this year.
and "wealth management products" really affect a very very tiny percentage of consumers. it'll hurt banks for sure and any institutions involved, and sure consumers will face their own headwinds, but it certainly won't be from any investment products. there's a fundamental difference with how loans, investments, business, etc work in the mainland... buying investment products there is like buying a business here, maybe; and buying a business, land, or real estate there is like how we buy stocks. they buy and sell like trading cards; and loans OBS between friends and family is almost just as liquid. these are small factors that i mention not because they're particular relevant to the economy (again we're taking fractions of a percentage) but it's important to know to begin to understand some fundamental differences in liquidity and asset/liability eco-system there.
At least those Chinese gov dare to face and poke at the bubble, unlike some in the west who still is kicking can down the road with their quarterly QE.
I know that central government has been trying to cool the housing bubble and people are saving money waiting to buy. It will be a good thing to have housing bubble burst.