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Chinese Home Prices Decline In Record Number Of Cities, Average Sale Price Has Biggest Drop Since Lehman

Tyler Durden's picture




 

China's attempts to "reign in" its credit and housing bubble (to "taper", if you will) and to deleverage its financial sector, so widely trumpeted over a year ago just before its banking system nearly locked up overnight, are rapidly becoming the biggest joke in finance, just after anything relatedd to the Fed of course. Sure enough, confirming that the reason for the epic surge in Chinese lending over the past few months (a topic we will touch upon later) was making sure that the all important housing bubble doesn't pop (at least not yet, recall: in China housing is a far more critical bubble than the stock market which is widely ignore by most as a "wealth effect" mechanism), was data released overnight showing how Chinese home prices reacted following the last few months of credit conservatism and destruction courtesy of the commodity funding deal rehypothecation scandal. In short: not good.

As summarized by Bloomberg, China’s new-home prices fell in a record number of cities tracked by the government as developers cut prices to boost sales volumePrices 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!

Some more details from BofA:

Prices of new commodity residential properties for 70 medium-to-large-sized cities surveyed by the National Bureau of Statistics (NBS) increased by 4.3% yoy in June compared with 5.6% in May. The number of cities with higher home prices mom was 8 in June, down 7 from 15 in May, while the number of cities with lower home prices mom was 55 in June, up 20 from 35 in May.

 

In June, Soufun’s 100-city average new home price index rose by 6.5% yoy compared to 7.8% in May. Divergence in home price growth narrowed slightly among the different tiers of cities in China as all of them experienced negative mom growth. June new home price growth was 14.3%, 4.6% and 0.8% yoy, respectively for Tier-1, Tier-2 and Tier-3 cities, down from 16.6%, 6.4% and 1.9% yoy in May.

 

National average sale prices (ASP) of new homes was RMB6,033/sqm in June, down by 1.5% yoy compared to 1.2% decline recorded for May.

Back to Bloomberg which reports that some Chinese cities started to relax property curbs to stimulate the local market, while developers have cut prices since March to lure buyers. The central bank in May called on the nation’s biggest lenders to accelerate the granting of mortgages, and urged them to give priority to first-home buyers.

Housing Minister Chen Zhenggao urged cities with high housing inventories to reduce them “with all means,” 21st Century Business Herald reported today, citing an unidentified local housing official who participated in a meeting that Chen held. Local authorities could set policies to stabilize their property markets based on local conditions, according to the paper.

...

“The current biggest problem of China’s property industry is that the housing inventories are too high,” said Liu Li-Gang, chief Greater China economist at Australia & New Zealand Banking Group Ltd. in Hong Kong in a phone interview today. “But the declines are still not very big. With more cities relaxing curbs and the economy stabilizing, the property market will gradually stabilize.”

Lowering prices to clear out excess inventory? What a novel concept. Too bad it will never be tried in the US. Or China for that matter, because should the ongoing home price collapse continue, the impacts on the bad loans held by China's semi-nationalized financial system will be dire. Which is why we expect that the recent surge in credit injection, which in Q1 was the highest on record as tracked by financial assets in the local banking system, will accelerate and blow out all previous records. In doing so, and especially if China indeed blocks all liquidity conduits to divert local cash offshore, expect Chinese inflation to finally pick up once again as it did in 2011, when it sent the price of gold to an all time high in the process.

As for China's "deleveraging", may it rest in piece.

 

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Fri, 07/18/2014 - 09:03 | 4972757 Thought Processor
Thought Processor's picture

 

 

Nothingburger.   

 

They'll end up bailing out all the crooks there just like the US gov. bailed out all the US crooks.

 

Same as it ever was.

Fri, 07/18/2014 - 09:08 | 4972776 GetZeeGold
GetZeeGold's picture

 

 

I'm trying to buy one of those homes in the ghost cities....but hell if I can find a realtor there.

Fri, 07/18/2014 - 09:04 | 4972766 RiskyBidness
RiskyBidness's picture

Its all chinese to me!!  Fuck it!  BTFD!

Fri, 07/18/2014 - 09:07 | 4972771 MFL8240
MFL8240's picture

China has the work ethic, money, people and raw materials and export market to grow out of this in the long term.  The US does not and resorts to printing confetti to lend to courrpt bankers taking large bonuses while firing millions and destroying the fabric of American life and we sit around and watch DC go along with this.

Fri, 07/18/2014 - 09:21 | 4972802 AssFire
AssFire's picture

Zactly, as Confucious would say: USA like fart on elevator, wrong on so many levels

Fri, 07/18/2014 - 09:19 | 4972803 LawsofPhysics
LawsofPhysics's picture

Interesting, who are they exporting to in the world that isn't broke? 

I call bullshit, the Chinese can simply sell to themselves.

Saying that the U.S. "doesn't export anything" is beyond stupid.  My soybeans and nuts are being exported to asia, at prices higher than I have ever seen.  I do accept gold, silver or diesel for payment too. 

Fri, 07/18/2014 - 09:28 | 4972854 Farqued Up
Farqued Up's picture

?

Wonder if China has extensive welfare give away programs such as food stamps, direct payments to non-workers, etc., etc., etc. ? I know they don't give unmarried queenies money to spit out babies. Anyone know? They'll recover if they don't constantly bribe the underclass. Amazing what can be accomplished when everyone has a work ethic and the slackers aren't pollycoddled.

Fri, 07/18/2014 - 09:26 | 4972860 yogibear
yogibear's picture

It is difficult to get real numbers from the central planning in China. 

It's a comparison on who's the better liar. In China a identified undeniable crook is quickly execute.

Maybe a Chinese version of Jon Corzine would have been allowed to slip through.

Fri, 07/18/2014 - 09:08 | 4972775 kurzdump
kurzdump's picture

The whole fucking world will end up in central banks balance sheets. Obey your earthly masters!

Fri, 07/18/2014 - 09:09 | 4972779 ekm1
ekm1's picture

That is not a problem at all.

 

China solves problems by shooting at crowds.

Fri, 07/18/2014 - 09:14 | 4972795 LawsofPhysics
LawsofPhysics's picture

Are people actually living in these homes?

 

Please, the single-party communist state in China knows how to "handle" any complaints...

Fri, 07/18/2014 - 10:14 | 4973091 CheapBastard
CheapBastard's picture

'Many empty house,' said Mr Sum Long Dong, Pres of the Wushi Realtor Assoc.

Fri, 07/18/2014 - 09:15 | 4972799 Eyeroller
Eyeroller's picture

Nothing is going to stop the bubble from being popped.

We had two events yesterday in Ukraine and Gaza that would have brought the markets to their knees in times past.

Dow 160 points down -- doesn't even qualify as a burp.

Already reading 'great buying opportunity today' on lame stream sites.

Not even a Martian Invasion could turn these markets.

Fri, 07/18/2014 - 09:15 | 4972800 disabledvet
disabledvet's picture

Again.."those are gonna be real Russian T-80's coming."

The airspace has now been cleared. "It's what everyone wants."

This whole market move has been nothing more than a dream...hiding a total nightmare.

Fri, 07/18/2014 - 09:16 | 4972805 omrizario
omrizario's picture

They shall increase exports to the US to boost the economy!

Fri, 07/18/2014 - 09:22 | 4972832 bbq on whitehou...
bbq on whitehouse lawn's picture

China is just house cleaning, the old administration and their friends. This is how China cleans up old ties and family businesses.
How else are you to make your new friends and their families rich if not forceing out the old families and their friends.

Fri, 07/18/2014 - 09:23 | 4972833 stutes33
stutes33's picture

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! Hmmm 0.48% and 1.5%? Wow thats a crazy move!!! Must be a slow day at CNBC, I mean ZH. 

Fri, 07/18/2014 - 09:22 | 4972835 Seasmoke
Seasmoke's picture

7/20/2014......drop the zero .....or something like that. .... WTF!!!

Fri, 07/18/2014 - 09:33 | 4972880 LawsofPhysics
LawsofPhysics's picture

So, make sure you are long going into the weekend?

Fri, 07/18/2014 - 09:35 | 4972895 kurzdump
kurzdump's picture

I bet 666 bucks nothing will happen on 7/20/2014.

Fri, 07/18/2014 - 09:32 | 4972878 yogibear
yogibear's picture

It's a economic war.

The boys on Wall Street and in Washington would rather see China's fraud blow up than their own.

Like the Japanese investors buying all that Hawaiian real estate. Then all that money disappeared after it blew up. Poof, vanished.

 

Fri, 07/18/2014 - 09:37 | 4972900 youngman
youngman's picture

Dow 1.3% is not much..when it drops 50%..then they have problems...less bribes for the ruling class

Fri, 07/18/2014 - 09:56 | 4972978 Ban KKiller
Ban KKiller's picture

Chinese democracy and free market in action! The peasant revolution is complete. 

Clean air and water? Where?

Fri, 07/18/2014 - 10:10 | 4973054 CheapBastard
CheapBastard's picture

They are running out of suckers. It's getting harder to sell $200k apartments for $1 million these days.

Fri, 07/18/2014 - 12:13 | 4973806 starman
starman's picture

Long fortune cookies! 

Fri, 07/18/2014 - 13:22 | 4974219 syntaxterror
syntaxterror's picture

But the average place there still costs 50x the average worker yearly pay.

It's still all good.

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