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How China Hides Its Tumbling Housing Market: It Simply Ignores It

Tyler Durden's picture




 

Recently we showed that in order to goose its fading all-important housing market (to China housing is like the stock market to the US: both mission-critical bubbles designed to give a sense of comfort and boost the "wealth effect"), China has first resorted to zero money down mortgages across various markets, and secondly to such gimmicks as "buy one floor, get one free." However, that's only part of the story. Even worse is what is not being disclosed to the general public: such as the true state of the housing market in China. Because according to a recent report on Sina, quoted on Investing In Chinese Stocks, when it comes to revealing just how bad things are domestically, Chinese developers are simply pulling a page out of biotech ETF playbooks, and simply not reporting price drops greater than 15%!

From Investing In Chinese Stocks (ICS):

Taking a page from the climate scientists who hid the cooling trend in global temperatures, Hangzhou government will hide the cooling trend in the real estate market. Any price decline more than 15% below the list price will not be entered into the online registry. Developers are not forbidden from cutting prices and no sales will be stopped, though at least one developer expressed concern that advance sales permits may not be issued if the price cuts are deemed too large.

In other words, clear the market supply imbalance, but don't see at market clearing prices, got that? Good luck.

ICS goes on to show an example on the ground of just how profound the chaos is on the ground in China now that homes are suddenly in an air pocket with no (immediate) bailout coming from the government: according to at least one real estate agent, price cuts alone would be enough to kill his firm, and that is assuming sale pick up in the first place.

Hangzhou held a 4-day real estate exhibition recently. Attendance was 230,000, but only 32 homes were sold. These numbers are an improvement from 2013 and 2012 though. One state-owned developer said that price cuts cannot cure the market. The government must step in and ease buying restrictions, ease borrowing limitations, reduce bank reserve requirements, allow people to borrow for second and third homes, etc., in order to instill confidence in the market. The developer also said the media and experts were giving one sided reports, causing more chaos in the market, while buyers are more strongly adopting the wait and see attitude. He said buyers have no bottom line, if you cut 10%, they want 15%, if you cut 15% they want 20%. His firm has used price cuts of 10% and he hasn't sold a home in 3 months. He said with government support, they can survive, but small private firms are not so confident.

 

A real estate agent said that even if sales pick up, price cuts will kill the firm. He said the government is more nervous than the industry because if land sales stop, they might not even be able to pay the wages of government workers. He expects, and hopes, the government will do something to rescue the market.

 

Dr. Ye Hongwei, Assistant Director of the Real Estate Investment Research Center, Zhejiang University, said the national government would not ease policy. He said there are really only two areas that might ease: buying restrictions and credit limits. The credit limits are set at the central government level and are unlikely to ease. The buying restrictions are set locally, but so far only small cities have enacted these policies. Wenzhou has seen prices fall for 30 straight months and there has been no real easing (aside from a small change last August). He said easing in Hangzhou is unlikely: it is a sensitive real estate market and a bellwether for the national real estate market.

 

Finally, another developer bluntly told reporters: the Chinese real estate market is not a fully free market, if the government wants to intervene they can. Also, these officials have a bright future, they don't need this risk, so a big policy easing is unlikely.

Well, if it doesn't work out for China's real estate industry (which according to SocGen indirectly impacts up to 80% of China's GDP), all those millions of people whose livelihood depends on flipping a bubble from one group of great fool to a group of greater fools, they can just open E-Trade accounts and do the same in the US only with stocks. There the number of transactions is also declining but at least prices are rising to fresh record highs day after day.

 

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Fri, 05/30/2014 - 17:24 | 4810979 RafterManFMJ
RafterManFMJ's picture

How the US hides it's crashing economy and rising police state: the MSM simply ignores it.

Fri, 05/30/2014 - 17:28 | 4810988 Harbanger
Harbanger's picture

Are our central planners modeling Chinas' central planners or vice versa?

Fri, 05/30/2014 - 17:31 | 4810992 LetThemEatRand
LetThemEatRand's picture

Same guys it turns out.

Fri, 05/30/2014 - 17:38 | 4811008 TeamDepends
TeamDepends's picture

Wang Computers.

Fri, 05/30/2014 - 17:51 | 4811045 cifo
cifo's picture

I do the same with my tumbling stocks. Simply ignore them.

Fri, 05/30/2014 - 18:21 | 4811138 Thorny Xi
Thorny Xi's picture

... silver, too ...

Sat, 05/31/2014 - 02:31 | 4812095 SAT 800
SAT 800's picture

Housing pricing in China profoundly meaningless. they have money; we don't. failure to understand basic economics. another useless article.

Fri, 05/30/2014 - 17:33 | 4810997 NOTaREALmerican
NOTaREALmerican's picture

Negative news just means you're a pessimist or (much worse) not a patriot.   Why take the risk of being ostracized when you can have so many more friends if you simply have perpetually happy optimistic (patriotic) attidutes. 

Fri, 05/30/2014 - 17:39 | 4811012 Kaiser Sousa
Kaiser Sousa's picture

"How the US hides it's crashing economy and rising police state: the MSM simply LIES ignores about it."

there you go...its fixed

Fri, 05/30/2014 - 17:25 | 4810981 LetThemEatRand
LetThemEatRand's picture

I was on the fence on buying property in China, but I was offered a free spiderman towel by the People's Bank, so I pulled the trigger.  

Fri, 05/30/2014 - 17:25 | 4810982 TeamDepends
TeamDepends's picture

You want to see ghost market?  No, round eye.

Fri, 05/30/2014 - 17:25 | 4810985 goldhedge
goldhedge's picture

Just like the bansksters the developers want some gubbermint luvin too.

Fri, 05/30/2014 - 17:29 | 4810990 NOTaREALmerican
NOTaREALmerican's picture

The magic of having the potential for infinite money is the ability to ignore anything that a problem.    We've truly reached an era when everybody can be above average.   Is this a great time to be living, or what?

Fri, 05/30/2014 - 17:38 | 4811010 Bill of Rights
Bill of Rights's picture

Exactly, I can hear them now, " we can't see shit up here in the Hamptons ha ha ha "

Fri, 05/30/2014 - 17:34 | 4810998 robertocarlos
robertocarlos's picture

It makes perfect sense. If you cannot have a 50% correction then the next best thing is a series of 15% corrections. After 4 transactions the price will be at market value.

Fri, 05/30/2014 - 17:36 | 4811002 debtor of last ...
debtor of last resort's picture

Don't know if 64 million empty free appartments is enough to stave off civil unrest within a billion peeps community. Maybe 20 thousand tons of gold will do the job.

Fri, 05/30/2014 - 17:35 | 4811003 BurningFuld
BurningFuld's picture

Thats the cool thing about fiat. It is created out of thin air and it goes back into thin air.

Fri, 05/30/2014 - 17:46 | 4811033 Drifter
Drifter's picture

Housing prices are not a good barometer of an enconomy when they're pumped up to bubble heights by "fog a mirror" 125% LTV govt guaranteed financing then come crashing down when said financing is withdrawn.

China's economy is no worse than ours, and they don't have 17 trillion dollar govt debt.

Don't understand all the China negativity here.

Fri, 05/30/2014 - 20:56 | 4811595 pacrim888
pacrim888's picture

You should live or visit China and you would understand all the negativity. Everybody is levered to their neck, house owners, car owners, local authorities, provincial governments, companies.

 

This leverage is either through the banking system, through the grey market (Trusts, local lenders, group of "investors") or your family members grouping together.

Fri, 05/30/2014 - 17:55 | 4811058 unplugged
unplugged's picture

Tyler, can you morph together the "deer in headlights" and this "head in sand" picture  - perhaps WB7 can do some magic

Fri, 05/30/2014 - 18:24 | 4811154 Dr Benway
Dr Benway's picture

"another developer bluntly told reporters: the Chinese real estate market is not a fully free market, if the government wants to intervene they can"

 

LOL unlike the fully free housing markets of the west? 

Fri, 05/30/2014 - 19:08 | 4811287 thisisjustarand...
thisisjustarandomusernameicreatedforzerohedge's picture

re: 'Recently we showed that in order to goose its fading all-important housing market [...] [resulted to using] such gimmicks as "buy one floor, get one free." However, that's only part of the story.'

yeah... because it may be wrong LOL do you even have any Chinese staff or vet your Chinese translations? did you read the comments of those stories? "get one free" was wholly translated incorrectly and did not mean a free floor as your paraphrase is suggesting...

 

hey i'm not saying the housing market isn't in trouble in china. and this is my favorite website and my most invaluable source. every other site i use has an alternative but this one is pretty special. so i'm not trying to be a jerk.  

but please vet your stories better because you are outright posting incorrect translations and pictures about china and misleading people as if they were fact or accurate when they're not


Fri, 05/30/2014 - 20:35 | 4811539 q99x2
q99x2's picture

Best to be a nomad and live in a tent these days.

Sat, 05/31/2014 - 08:38 | 4812279 AdvancingTime
AdvancingTime's picture

Now we wait and watch to see how big a problem this becomes. 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.

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

 

 

Sat, 05/31/2014 - 11:30 | 4812532 Sirius Wonderblast
Sirius Wonderblast's picture

In my years of dealing with Chinese, the first two things I learned were: 1) they are lying (always); 2) they are absolutely positively out to stiff you personally and the west in general.

Do NOT follow this link or you will be banned from the site!