This page has been archived and commenting is disabled.
Burst Chinese Housing Bubble Leads To First Annual Price Decline Since 2012; Prices Drop In Record 69 Cities
It has been over six months since the Chinese housing bubble has popped. What's worse, as overnight housing numbers out of China confirmed, the government has so far failed to contain the fallout, and according to the National Bureau of Statistics, which is anything but, after a fifth straight monthly decline, Chinese home prices have now wiped out all price gains in the past year. This was immediately spun as bullish by media outlets and sellside experts as "raising expectations the government will have to implement more economic support measures to cushion the blow." I.e., buy stocks because central banks will push risk prices artificially higher yet again. In other words, bad is still good and failure continues to be success.
According to the NBS, average home prices in 70 major Chinese cities were down 1.3% in September from a year earlier, the first such drop since November 2012.
As compiled by Reuters, new home prices fell month-on-month in a record 69 of the 70 major cities, up from 68 in August. Only the southern city of Xiamen saw stable prices last month, National Bureau of Statistics (NBS) data showed.
The worst performance was in the eastern city of Hangzhou, where prices sagged 7.6 percent in September from a year before.
The decelerating property market, which accounts for about 15 percent of China's economy, has crimped demand in 40 sectors ranging from steel to cement and furniture.
Actually, no. According to SocGen, "the aggregate exposure of China’s financial system to the property market is likely to be as much as 80% of GDP." Which is why as we said in May, "this is not a sector that can go terribly wrong if China wants to avoid a hard landing."
But much more importantly, when it comes to net worth, what the stock market is to the US, housing is to China, as we have also shown previously.
It is in this context that one can't help but laugh at the following consensus forecast that has just China and the US as accountable for virtually all the growth in 2015:
Because until and unless China manages to arrest its tumbling housing market, which now is a net drag on net worth over the past year, one can kiss about $1 trillion in "GDP growth" in 2015 goodbye.
Some other observations on the Chinese housing market. From Reuters:
"The property downturn is still the main drag on the economy," Wang Tao, an economist at UBS in Hong Kong, said in a note.
"The negative impact of the ongoing property downturn is being felt not only in heavy industry, but also in manufacturing investment."
The slowdown in the housing market followed GDP data showing the economy grew at its slowest rate since the 2008/2009 global financial crisis in the September quarter, adding to worries that it will drag on global growth.
Yu Bin, a senior economist at the Development Research Centre (DRC), the cabinet's think tank, said on Friday it expected China's economy would grow by 7.4 percent this year, slightly below the government's target of 7.5 percent. That would be the slowest pace in 24 years.
And some more from Bank of America:
Prices of new commodity residential properties for 70 medium-to-large-sized cities surveyed by the National Bureau of Statistics (NBS) declined by 1.2% yoy in September compared with 0.5% growth in August. The number of cities with higher home prices mom was 0 in September, down one from 1 in August, while the number of cities with lower home prices mom was 69 in September, up one from 68 in August. Moreover, the number of cities with lower home prices yoy jumped to 58 in September from 19 in August.
In September, Soufun’s 100-city average new home price index rose by 1.1% yoy compared to 3.2% in August. Divergence in home price growth narrowed slightly among the different tiers of cities. September new home price growth was 5.4%, - 0.4% and -2.8% yoy, respectively for Tier-1, Tier-2 and Tier-3 cities, down from 8.0%, 1.1% and -1.3% yoy in August.
National average sale prices (ASP) of new homes was RMB5,987/sqm in September, down by 0.6% yoy compared to 1.1% decline recorded for August
![]()
Vacant residential GFA waiting for sale increased by 6.3 mn sqm in September, up from 5.9 mn sqm in August. According to the NBS data, completed unsold residential inventory stood at 376mn sqm, which is equivalent to 4.0 months of inventory, based on the average monthly sales volume in the past 12 months.
Perhaps it is time for China to take a page out of Europe's playbook and to add the price of hookers and cocaine when calculating the blended average price of an apartment...
- 10577 reads
- Printer-friendly version
- Send to friend
- advertisements -






Unpossible
<Will someone please rerun these numbers and get back to me with the correct answer? - Mao>
Inconceivable!
You're not saying it properly.
http://i1.kym-cdn.com/photos/images/newsfeed/000/097/516/5228_1cdc_480.png
Rut Roh!
Sum Ting Sofa King Wong!
Are you aware that these aren't funny?
Uh oh! FED better get busy printing to fill that hole with more 1's and 0's.
Some here sure do love tossing that asset chart around... what's ignored however is the fact that the vast majority (upwards of 90%) own their homes with zero debt. Oh no, the place they live is now worth less.. it literally does not matter.
When the dow crashes again however, millions will be out on the street.
You mean China is not like the West?
Thats simply not acceptable. How are we going to analyse them then?
bubble is still - bubble
Great, no margin calls then.
Just be sure to keep me up-to-date on how you're doing after Cultural Revolution 2.0 rolls around.
That last one stung a bit
So basically, all you know and remember about China is the Communist revolution?
Ever heard of Silk Road trade, whicch went all the way up to Venice and North European slaves would fecth quite a handsome price on that trade route?
The road that built the slanted eyes. You know you go straight to hell once those fall out of round.
Uhh, the Cultural Revolution wasn't the Communist Revolution you idiot.
The Cultural Revolution was a communist/nationalistic revolution spurred on by Mao after several failed 5yr plans and terrible faminines that killed millions.
Mao needed to stir up the masses against the intelligentsia, who he was using as a patsie for HIS failures, to deflect blame for the failing economy and culture... sorta like now... but this time it's the old guard of the communist system getting it.
Read up, you fucking idiot... sort of a big deal and blot on Chinese history. Set them back decades. I'm guessing older Chinese can still tell tales of how it impacted their families.
Okay.
So basically, all you know and remember about China is the Cultural revolution?
Ever heard of Silk Road trade, which went all the way up to Venice and North European slaves would fecth quite a handsome price on that trade route?
It's probably best if you just stop commenting.
Why confirm everyone's initial thought that you're an idiot, by continuing to prove the theory correct? Let the mystery live on a little longer.
It's alright. The Democrats are trying to make the world a better place for you and your ilk.
Shhhhhhh... go back to watching Scooby now. You know you like it when Scrappy stops by.
there was some "good" that came from it, but only really by accident. it sounds horrible from a western perspective, but as fucking backwards as people are today, it was far more fucking backwards prior. the other accidental advantage is that pretty much everyone knows how fucked up it was, an entire generation got to get in touch with their primal behavior, and no one wants any of that shit to ever be repeated. so... as long as there's no crazy chaos like that existing, no one's really willing to try and overthrow anything... for fear of it being that but worse.
Calling somebody a "fucking idiot" is not an argument.
There was in fact a famine in China during the early 1960s. It was to some extent due to Mao's Great Leap Forward campaign, but mostly to bad weather, flooding, etc. The "terrible famines that killed millions" were long-after-the-fact statistical inventions meant to pave the way for the restoration of capitalism during Deng Xiaoping's reign. That was the only famine that occurred during New China. During Old China famine was practically an annual event.
What in fact happened in Mao's time in power was that a huge and ancient country threw off colonialism and feudalism, ignorance, poverty, and disease. (The long struggle for power, led by Mao, was the greatest military-political campaign in human experience, in my opinion.) Industrialization, agriculture, and education made huge strides. These tremendous accomplishments were achieved by the masses of the people. Everything possible was done to eliminate the division between the rich and the poor.
That was good for everybody but the rich. Pity the poor oppressed Koch brothers types.
Mao initiated the Cultural Revoluion to prevent higher-ups from restoring capitalism. For ten years it stopped them. Then he died (1976), pretty soon Deng Xiaoping came to power, and capitalism was restored. Back to the drawing board.
Hundreds of millions of people revere Mao to this day. He remains a beacon of hope to those billions who continue to live in abject poverty in a world of inconceivable wealth. Nobody gives a damn about Deng Xiaoping.
well they have "shadow" debt, i.e. owed to their parents/grandparents or rich cousin who helped pay for the house. but it's correct that they generally owe little/no debt into the mortgage banking system, at the individual level. some developers and other real estate corporations have loans/bonds/other and may be at risk, but many more others have been hoarding cash with an eye on picking up some firesale assets for development over the long-run.
housing prices drifting downwards slowly but for an extended period is bullish equities, but not because of potential stimulus (forget it, there is no housing stimulus coming unless property prices crash ~25%). there are millions of middle-class turning wealthy each month, in addition to trillions in idle cash looking for a home. as housing and wealth-management products get less fashionable, equities remain one of the few choices to invest in. with price ratios at about half of US metrics there is serious rally potential.
sure, but those "shadow debts" are meaningless. It's always informal, and noone actually expects to be repaid. If the property is not being lived in, they might expect to be able to crash there. If you are planning on selling it off, they probably will hit you up for the "loan", but other than that, it's not really a loan at all.
housing prices drifting downward is fairly meaningless. wages are still increasing, other assets are still be accumulated. Does anything honestly think people drop $150k on a car here because they want to? That cash gets dropped (increasingly by normal people) because there's not much else to do with it. Sell your home to trade up? 100w isn't gonna get ya much more of anything.. you're gonna get hit for capital gains in selling your place, tax for buying the new one, agent fees on both ends, renovation, decoration, and 100w will get you something smaller and closer to the core, or larger and further away. Invest it and eat the interest? Sure, you can get an easy 5~6%, but no one really cares, it's not enough to get anything all that nice anyways... plus, if you go long term, you risk losing out to inflation, short term, the rates are not stable. And if that cash is locked up, if you need it, you're fucked. Stock market? Unless you have insider info, everyone knows it's just retarded to play. Retirement? Living here is dirt cheap anyways once you have a place to live and pension will more than cover it. The parents, you gladly get them hard assets because all that shit will be yours again anyways. So you dump that cash on living well and pampering the next generation. With a nice car, if you are seriously short of cash, you can always get a loan on it or just sell it. You can do the same to the house, but you're gambling your ability to live... with a car, eh, doesn't really matter in the end and at least you can show it off.
There is so much fucking idle wealth sitting there it's not even funny. Quasi-financial products are increasingly putting together ways to get that into the hands of small business in a legitimate way.
Going upside down on a mortgage doesn't really matter as long as you can still pay it. Mortgages are FULL RECOURSE, so there's no walking away. If you are fucked and can't pay on your sole self-used property, you do the dance, get your documentation in order, and payments will be suspended or reduced with no real consequence. At most you get pissed off, but thems the breaks. If you're a flipper... well, then you're fucked, but with regulations in place, no one flips anymore.
Very good analysis. We have identified the problems and have had long discussions with the leading experts in the field and after thorough and meticulous deliberations we have decided that we will print more money.
What say you 50 cent bloggers?
Yeah....like CNBC is actually gonna show up.
At least CNN still loves us.
What say you 50 cent bloggers?
You can take away our markets, but you will never take away our herd mentality! _ ZHers.
Just got my ink.....I'm in the gang now.
We're going off the cliff today? I'm totally in!
Sure I'll drink the grape Koolaid.
Rates cannot go up because it will blow the interest payments.
Markets cannot go down because it will blow up the Banks balance sheet Assets and collaterals.
Jawboning till the end.
In June:
http://www.independent.co.uk/news/business/news/mark-carney-interest-rates-could-go-up-sooner-9533848.html
In Oct:
http://www.telegraph.co.uk/finance/bank-of-england/11181732/Interest-rates-could-stay-low-permanently-says-Bank-of-England-deputy-governor.html
Not a problem, just issue 0 down, 0 interest 100 year mortgages, the gubmint can just print up any slack that occurs. We have entered a new financial world where profits no longer matter. We have this thing called a "printer" - The Bernake - 2009
bull shit continues;part of the phoney gdp based on hsg bubble china style-empty homes and cities as bank accounts. ok lets analyze; no cash flow, empty as in deteriorating and this is a serious problem, taxes and minimal electricity/ac/heat- hmmm, a monthly loss. so this is wise and how one accumlates wealth. ok, i understand this new wealth paradyn in the new normal. s/ all fucking bullshit,ha...
I love the chart showing the largest component of household wealth that compares America and China. It has huge implications for both countries.
For china; 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
For America: I contend the primary reason that inflation has not raised its ugly head or become a major economic issue is because we are pouring such a large percentage of wealth into intangible products or goods. When the money flow changes watch out! More in the article below.
http://brucewilds.blogspot.com/2014/04/inflation-seed-of-economic-chaos....
If the "ghost cities" stories are true, which they almost certainly are, the opaque multi-trillion dollar "shadow banking system" is tied into a vast number of illiquid propery assets. Bursting bubbles, financial dominos falling, etc., are only a matter of time. The question is, is it now?
duplicate