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Mapping China's Bursting Real Estate Bubble

Tyler Durden's picture




 

With global growth concerns on the rise, whether a bust in the Chinese housing sector could threaten the economic activity and financial stability of the world’s largest contributor to growth is top of mind for Goldman Sachs. As Michael Pettis warns, "this story only has a few possible endings, all of which imply a significant reduction in economic growth as debt problems are addressed." The following 3 charts suggest Pettis is right...

Just the Facts...

 

Where The Pain is...

 

And The Policy Decisions...

 

Just remember, as Hui Sahn and Andy Tilton note, "Since easier credit pulls forward [housing] demand from the future, easing must be done judiciously to avoid precipitating an even larger correction later."

*  *  *

So be careful what you wish for.

 

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Wed, 10/22/2014 - 18:11 | 5365186 idea_hamster
idea_hamster's picture

"Policy Support Cycles," or http://en.wikipedia.org/wiki/Pilot-induced_oscillation?

Watch the "soft landing" here: http://www.youtube.com/watch?v=wxX4QvLylLY

Wed, 10/22/2014 - 18:52 | 5365402 Jannn
Jannn's picture

China Gold Association: 2013 Chinese Gold Demand 2199 mt 

https://www.bullionstar.com/blog/koos-jansen/china-gold-association-2013...

Wed, 10/22/2014 - 18:06 | 5365191 ninja247
ninja247's picture

What's the chinese character for subprime?

Wed, 10/22/2014 - 18:08 | 5365206 localsavage
localsavage's picture

I think it is the $

Wed, 10/22/2014 - 18:08 | 5365208 Winston Churchill
Winston Churchill's picture

Fu.

Wed, 10/22/2014 - 18:28 | 5365293 GOSPLAN HERO
GOSPLAN HERO's picture

Window sign at local Chinese restaurant: 

 

"We pay cash for fat dogs and cats."

Wed, 10/22/2014 - 18:48 | 5365390 Let them eat iPads
Thu, 10/23/2014 - 07:22 | 5366664 Apostate2
Apostate2's picture

ci ji daikuan i.e. second level loans

Wed, 10/22/2014 - 18:30 | 5365304 Son of Loki
Son of Loki's picture

It's more politically correct to say, "correction" then "bursting bubble."

Wed, 10/22/2014 - 19:00 | 5365415 AdvancingTime
AdvancingTime's picture

Much of the cost of any building or home is in the finishing cost. The shell is fairly inexpensive compared to the final cabinets, flooring, fixtures, Havc, and such. In China it is not uncommon for the buyer to finish the buildout. This may mean many of the towers in the ghost cities are no more than empty shells. How and why do you finish your unit in an empty building? It seems a bit of a catch 22.

In America much of our wealth is held in stocks and paper promisies while in China it is in these empty towers. This will get very interesting going forward. More about the house of cards china has built in the article below.

http://brucewilds.blogspot.com/2014/03/china-and-great-credit-trap.html

 

Thu, 10/23/2014 - 08:47 | 5366843 Antifaschistische
Antifaschistische's picture

The most fundamental problem I see in China...(and I'm not speculating, I've been on the ground, walked the streets, rode the subways, eaten in the dark alleys and learned not to say my favorite food is spicy)....is the the people in China love the street.  It's such a fundamental part of their culture in every single city.  You do lose some of the street life when your replace a quaint neighborhood with a commoditized high rise where every single apartment/home is identical.  The last city I was in (Xi'an) probably has 50 uber high rise "apartment" buildings completely empty....and the people don't really want to live in them. I'm not speculating, I talk to the people.  So....I'm with you TimeAdvance, it's going to be interesting.  And I priced an apartment in Xi'an and it was about $120 a square foot.  Which means a 1000 square foot home is running you about 12x per/capita gdp.   That's high by most standards. (not sure if the place I priced is average or not...certainly wasn't in the high rent district)

Wed, 10/22/2014 - 19:06 | 5365445 reader2010
reader2010's picture

There is no bubble.  Owning is better than renting, according to the orthodoxy. In reality,  housing is the thingy to make slaves docile. In other words,  it's a one of effective tools for social control in the elite's tool box. Given this much of technology that we have today,  technically humans can clothe and house and feed all fellow humans for free -  if means of production are not in private hands. 

Wed, 10/22/2014 - 19:59 | 5365619 RadioactiveRant
RadioactiveRant's picture

Own, become a bitch of the banks.

Rent, become a bitch of the rent seeking middle class.

Which do you suggest?

Thu, 10/23/2014 - 07:17 | 5366648 TwoShortPlanks
TwoShortPlanks's picture

Shhhhh...Everyone shut up, the Top Charm commercial is on...
https://www.youtube.com/watch?v=nC-5txDDnU8

If you think about it, everything you need to know about the Chinese Real Estate Bubble is in this Ad; stimulus, artificial expansion, happy owners, unhappy non-owners, wow, it's better than Wiki.

PS. TSP quick update here http://twoshortplanksunplugged.blogspot.com.au/2014/10/multiple-irons-in-multiple-fires.html

Thu, 10/23/2014 - 11:37 | 5367547 NumNutt
NumNutt's picture

Hmmm....When they say "own" do they mean financed by a bank? Or purchased with thier own cash? Two very different situations. Because if you "own" your house (no mortgage) as long as your not planning to sell, who gives a shit what the markets do. Just make sure to pay your annual taxes.....

Wed, 10/22/2014 - 19:15 | 5365470 Hongcha
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This is nothing compared to the US collapse.  China will continue on to replace the declininig US as a superpower.

Wed, 10/22/2014 - 19:20 | 5365486 FredFlintstone
FredFlintstone's picture

hinese are pretty whack

Wed, 10/22/2014 - 20:13 | 5365684 Bumbu Sauce
Bumbu Sauce's picture

What say you 50 cent bloggers?

Wed, 10/22/2014 - 20:23 | 5365720 walküre
walküre's picture

property market contribution to 2013 GDP growth of 1.8% does not match the 30-40% of local government tax revenues on land sales or the 68% of RE credit exposure / GDP

sumting no matchy matchy hia

Wed, 10/22/2014 - 20:31 | 5365741 q99x2
q99x2's picture

Does this mean I won't feel like I'm at the tower of Babel when I'm at college next year?

Thu, 10/23/2014 - 06:42 | 5366635 vyeung
vyeung's picture

18% have mortgages + minimum down tells you its NOTHING like sub-prime! Lets the numbers do the talking.

No NINJAS anywhere. Correction in the chinese real estate market, YES. Crash implosion, unlikely!

Thu, 10/23/2014 - 10:47 | 5367349 shepsdad
shepsdad's picture

30% down payment?

5 year loans (where advanced repayment is common)?

I'm sorry is there a problem here?

The Chinese look to be the envy of the world.

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