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China Housing Bubble Bursts: Q3 Land Sales Crater 50%

Tyler Durden's picture




 

China may be doing everything in its power to divert attention from the simple fact that its housing bubble, the largest in the world in terms of both assets comprising it as well as divergence from fair value, has burst. But while there is no clear threshold of what constitutes a bursting bubble when it comes to housing, the latest data out of Soufun, China's largest real-estate website, which said that land sales have dropped a massive 22% to 1.7 trillion Yuan in 2014 so far, is likely as clear an indication as any that Beijing is about to panic.

And if that was not enough Bloomberg adds that land sales in 300 cites followed by Soufun fell almost 50% Y/Y to 415.9 billion yuan in 3Q, while residential land sales declined more than 50% to 265.3b yuan in 3Q.

So why, aside from the obvious, is this relevant? Because recall as we reported two weeks ago when looking at US household net worth, in the US it is all about (record) financial assets. So much so, in fact, that financial assets as a percentage of total household assets have never been higher at 70.3%, which also means that real estate as a percentage of total is as low as it has ever been.

Meanwhile, in China few households care as much about financial assets (the ones that do are largely a part of the Politburo or the ultra-rich oligrachy). Instead, the largest Chinese household asset is Real Estate, which at 74.7% of total household assets, is by far the most valuable asset that China's population has.

 

And once a few hundred million Chinese wake up and realize that the "wealth effect" portrayed by the blue bar above has been obliterated, the riots currently taking place in Hong Kong will be a gentle warm up for what the People's Liberation (sic) Army will be about to face.

 

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Mon, 09/29/2014 - 15:51 | 5268051 random999
random999's picture

wow... now we´re talking

However, correct me if I´m wrong, but we are talking land sales aka new production?
In that case, well..everyone knew it had to slow down at some point.

Mon, 09/29/2014 - 16:25 | 5268145 zaphod
zaphod's picture

That chart does not say that China is f**ked. 

That charts days that we are both f**ked, just in different ways. 

Mon, 09/29/2014 - 15:50 | 5268056 yogibear
yogibear's picture

Kaboom!!!

It's all coming apart globally. 

The Federal Reserve can have fun trying to save the world by printing away.

Mon, 09/29/2014 - 15:54 | 5268067 Cognitive Dissonance
Cognitive Dissonance's picture

You haven't seen "printing" yet. Up to now they were just practicing.

Mon, 09/29/2014 - 16:28 | 5268154 Caviar Emptor
Caviar Emptor's picture

Yes: printing and price controls

Mon, 09/29/2014 - 16:35 | 5268178 Winston Churchill
Winston Churchill's picture

You missed capital controls.At least for individuals.

Gold bitchez.

Mon, 09/29/2014 - 16:47 | 5268212 Caviar Emptor
Caviar Emptor's picture

Check

Mon, 09/29/2014 - 16:10 | 5268110 Bell's 2 hearted
Bell's 2 hearted's picture

they can't/won't

 

QE ending (for now)

Mon, 09/29/2014 - 15:52 | 5268061 Cognitive Dissonance
Cognitive Dissonance's picture

Ouch! That's gonna leave a global mark.

Mon, 09/29/2014 - 16:36 | 5268182 Winston Churchill
Winston Churchill's picture

Not even a Chinese laundry will able to get it out.

Mon, 09/29/2014 - 15:52 | 5268064 Dr Strangemember
Dr Strangemember's picture

I wonder if, given a dive in Chinese net wealth,  this will have a negative result in all those Chinese buying homes in the US???

Tue, 09/30/2014 - 00:10 | 5269631 Wild Theories
Wild Theories's picture

not if they paid for it with cash with little debt obligation, which seems to be the norm.

 

but, if there are no more Chinese coming to the west to buy more houses at ever higher prices, that would create potential flow-on effects.

Mon, 09/29/2014 - 15:53 | 5268069 Zirpedge
Zirpedge's picture

Time for the China to extend subprime loans to all those displaced peasants. Don't the call them wiggers.

Mon, 09/29/2014 - 15:56 | 5268079 Bell's 2 hearted
Bell's 2 hearted's picture

yeah, i really want to own yuan now

 

King Dollar

 

importing DEFLATION on tap

Mon, 09/29/2014 - 16:31 | 5268160 Caviar Emptor
Caviar Emptor's picture

Make mine a BIflation, on tap.

Mon, 09/29/2014 - 15:59 | 5268083 Barnaby
Barnaby's picture

Eh. Wake me up when I'm a multi-multi millionaire. Until then I'll just sit here being really rich.

Listen to Cracker: Turn on, Tune in, Wank off, Spooge out, With me

Mon, 09/29/2014 - 16:00 | 5268087 ekm1
ekm1's picture

If houses are sold at $100 per piece, then they would sell all inventory within the day

 

issue is that, they want to........wait for it.....wait for it.........MAKE A PROFIT

 

Do you remember the word......PROFIT?

Mon, 09/29/2014 - 16:13 | 5268117 Bunghole
Bunghole's picture

yes, and I also recognize CONDESCENDING when I see it.

Mon, 09/29/2014 - 17:48 | 5268401 ekm1
ekm1's picture

all intentional

Mon, 09/29/2014 - 16:02 | 5268089 CharlieMike
CharlieMike's picture

Sum Ting Wong

Sorry couldn't resist.

Mon, 09/29/2014 - 16:03 | 5268092 css1971
css1971's picture

CHINA is the NEW JAPAN!!!!

Mon, 09/29/2014 - 16:04 | 5268095 Osmium
Osmium's picture

It's all contained.

Mon, 09/29/2014 - 16:05 | 5268098 Bunga Bunga
Bunga Bunga's picture

What is the Chinese of "Real estate never goes down"?

Mon, 09/29/2014 - 16:09 | 5268106 Winston Churchill
Winston Churchill's picture

They shoot bankers, so what will they do with realtors ?

Mon, 09/29/2014 - 17:42 | 5268379 Vampyroteuthis ...
Vampyroteuthis infernalis's picture

They shoot bankers, so what will they do with realtors ?

Hang them?

Mon, 09/29/2014 - 18:04 | 5268466 TheSecondLaw
TheSecondLaw's picture

Doing business that has a negative impact on the exact and precisely forecasted GDP growth number is a crime against The People and will be punished.

Mon, 09/29/2014 - 18:52 | 5268598 zipit
zipit's picture

Hung So Lo

Mon, 09/29/2014 - 16:09 | 5268103 Lore
Lore's picture

The analysis is incomplete, which is bothersome. We're told only that land sales in China have dropped, and tossed a couple of numbers without context: bones without meat.  "Land" does not necessarily translate to homes, especially in China, where every city has a multitude of stack-em-and-pack-em apartments.  What do we know about supply in recent years?  What about valuations for new and existing homes?  Housing starts?  Regional considerations?  At least a house is something to keep you warm and dry.  "Financial assets" are largely reducible to nothing.

Mon, 09/29/2014 - 16:42 | 5268194 RadioactiveRant
RadioactiveRant's picture

You could argue that land sales are a leading indicator of new home sales, and confidence in the house building sector generally.

Doesn't mean the can won't be kicked down the road either.

 

Mon, 09/29/2014 - 17:46 | 5268396 Winston Churchill
Winston Churchill's picture

Without knowing how Chinese developers run, its hard to judge.

I suspect they have no 'land banked' like western ones, in which case its

highly significant and will have a very quick effect.

Big western developers quite often have ten years of land banked,so could in theory

run for those ten years without buying more.

Mon, 09/29/2014 - 16:13 | 5268121 orangegeek
orangegeek's picture

funny

 

communists are so smart

 

time for China to fire up the internment camps again

Mon, 09/29/2014 - 16:39 | 5268187 Stormtrooper
Stormtrooper's picture

FEMA could help them with their latest designs.

Mon, 09/29/2014 - 16:19 | 5268134 wmbz
wmbz's picture

Looks like this would be a great time for savy real estate infestors to get out there and start snapping up the bargins. Everyone knows that RE like to stawk market only goes one way and that is up!

We are going to need MOAR!

Mon, 09/29/2014 - 16:29 | 5268156 walküre
walküre's picture

Did they run out of paper or ink or both? Mao papers are printed in every Chinese basement and converted to tangibles around the world. This is good news for people on the Westcoast. The flood of Chinese immigrants is finally coming to a screeching halt.

Mon, 09/29/2014 - 16:33 | 5268168 Quinvarius
Quinvarius's picture

I didn't think people were allowed to buy land in china anyway.  They lease from the gov for 70 years or something.  Why buy there?

Mon, 09/29/2014 - 16:34 | 5268176 Uchtdorf
Uchtdorf's picture

What does this article have to do with the price of tea in China?

(Sorry, down me for that stinky/corny joke.)

Mon, 09/29/2014 - 16:35 | 5268177 Mark123
Mark123's picture

I think this is very significant....all of China's recent "wealth" is based on local governments selling "their" land to developers for ludicrous amounts.  This created the illusion of wealth, and paid the bills (and all of the bribes).

If this really is the beginning of this ponzi falling apart it will tear the whole charade of super-rich Chinese tycoons apart.  Don't get me wrong, the Chinese have worked very hard and made real money...what they don't realize is that all of the real wealth has been put up as collateral so the Chinese crooks can have fun in the global casino/fiat world run by global banking cartel.  Vancouver, California, New York, Toronto etc etc is full of these crooks (at least their kids).

How will it all end!!

Mon, 09/29/2014 - 17:19 | 5268208 bid the soldier...
bid the soldiers shoot's picture

You don't think the PBOC would intentionally release phony numbers to help some of their cronies make a killing in some obscure derivatives in an undisclosed market?

The Fed would. (and did)

Mon, 09/29/2014 - 17:40 | 5268374 numapepi
numapepi's picture

What about the ghost cities? Don't their ancestors want to live in a high rise anymore? 

Mon, 09/29/2014 - 17:56 | 5268436 Loucleve
Loucleve's picture

I was gonna short TAO, but didnt.  Not a good trader.

But runaway gap down today, and still above the 200 day.  Maybe for those more nimble than I.

Mon, 09/29/2014 - 19:47 | 5268764 AdvancingTime
AdvancingTime's picture

The debate continues as to how stable china really is. 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

Tue, 09/30/2014 - 00:20 | 5269652 MsCreant
MsCreant's picture

So these are the folks that have Russia's back.

Uh huh! Erm, yeah. 

Everyone is desperate and posturing.

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