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Chinese Home Prices Suffer Biggest Annual Drop Ever: Why This Matters
While the world's attention is glued to events in Greece, the real action continues to evolve quietly thousands of kilometers east, in China, where the near record surge in new loans remains unable to offset the dramatic slowdown in shadow banking issuance. And while China's bubble-chasing, animal spirits have recently reoriented themselves from real estate to the stock market, it is the real estate that holds the bulk of China's wealth. The problem here is that as China reported overnight, new-home prices in the world's most populous country just recorded their biggest annual decline ever!
January data shows China's home prices continue their slide... pic.twitter.com/FvVNMFEhro
— Tom Orlik (@TomOrlik) February 17, 2015
On a sequential basis, housing prices in the primary market fell 0.4% mom in January, more than the 0.3% decline in December. 64 out of 70 cities monitored by China’s National Bureau of Statistics (NBS) saw housing prices fall from the previous month (vs. 67 out of 70 cities in December). The largest month-over-month price fall came from Quanzhou, a lower tier city in Fujian province.
Chinese Home Prices Fell in 64 of 70 Cities Surveyed in Dec MoM (Any signs of improvement have stalled) pic.twitter.com/aAYMPOPlmA
— Michael McDonough (@M_McDonough) February 17, 2015
Broken down by Goldman, on a year-over-year, population-weighted basis, housing prices were down -5.0% (vs. -4.3% yoy in December). Hangzhou continued to be the city with the largest price correction, with the yoy housing price down 10.1%, vs. 9.9% in December.
What's worse, is that the tepid dead-cat bounce seen in the past few months has once again ended and is now headed lower yet again.
In other words, the beneficial impact of the recent surge in credit creation and excess liquidity has already faded when it comes to primary Chinese wealth assets because recall that while in the US 28% of household wealth is in real estate, with the remainder in financial assets in China it is the opposite:
... and as we noted previously, China is now rapidly becoming like the US, where any excess liquidity is flowing direct into the P/E expanding stock bubble instead, in turn leading to a collapse in the M2 which as we noted recently just tumbled to the lowest reading on record as China joins every other nation whose conventional monetary pipeline has become clogged as a result of chasing stock market bubbles.

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i keep thinking we are in a Global Depression... (good thing i know i'm crazy!)
I think you will be right. For now, the central banking powers that be have inflated assets what they could, but when that breaks look out below. Central banks will no credability, the rich will be poor, and the poor will be fucked because they wont have a job or access to debt.
How much for the ghost house?
Welcome to the Year of the Sheep-les.
I do not think he considers stawk market prices when he says depression. Stawks belong to banks and machines and are completely disconnected from mainstreet.
when all become obvious the US with the "stawks market" where it is its gone looks like idiotic cartoon joke...
they aren't inflating assets...the are deflating currencies
Sum Ting Wong?
Time to move in and scoop up some cheap real estate! Just like Detroit!
Not yet, give it 12 months to work out.
More repair work that way. Timing is everything.
Still about 400% overpriced...similar to several areas here like NYC and California.
Wait awhile...be patient. I picked up a $865,000 place for $285,000 back in the 80's RE crash when the fed did not prop it up like they do today. However, they can't juggle it in the air forever.
Haha yeah 2 million RMB for a 50 sqm made in china single glass no insulation leaking pipes from the neighbour apartment with 50 years left on the landlease.
Sounds like hell of a deal to me
Honestly I´d rather invest in a 1 dollar lot in detroit.
Where would you find that house? On Fox News?
Shenzhen.. In beijing the prices would be higher.
Of course we´re talking about central locations, not suburbs.
Oh and yes those singleglas no insulation 30-34 floor buildings with leaking pipes I´m talking about are still being built as we speak, in the year 2015. Excluding the landlease and bribes (which of course most likely eats a big pice of the pie) the markup must be around 1000% or more. No shit some people have been carving gold out of nowhere. As long as you know your local bankster you´ll allway do fine...
I live in China.We bought a new home in a high rise, and have looked at many. I have never seen anything like what you describe. I have 15 years construction experience. I call bullshit on your story.
Sure thing bandGap, go right out and buy a run down piece of shit house for 'only $500' !!! Yeah, but now i gotta pay the tax bill of $4500 per year !! I am a real estate genius !!
Idiot
Maverick
How can we trust any numbers coming out of China?
Cripes, we can't even trust our own government fodder.
We cannot, that is why it is probably much, much more severe across the big pond than the communist pieces of shit are willing to admit...
Because they have cash spread everywhere?
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Fuck reality! Make up the numbers and all is well.
CHinese prefer to buy real estate abroad since they cannot truly own any property in China, all land is effectively owned by the State and leased out.
Its pretty much the same in the UK and Commonwealth Realms (Australia, Canada, New Zealand), the Crown has allodial title.
Paid your property taxes lately?
It's the same as America. You have to pay a monthly rent on your land and the home on it. Don't pay, and the gov't takes your home. It's called property tax, and China doesn't have it.
Land ownership in China is the same as America in any condo, apartment, co-op, PUD, PAD, or HOA. Everybody ownls the land in common, but you have the right to exclusive use of one piece. In China, the gov't has the right,not always exercised, after 60 years, to take the land for the greater good. In America it is called eminent domain. The person who has a home on it gets reimbursed cash or a voucher for a new home in the area. There is relocation assistance in the interim. A lot of people have become instantly rich this way. Very few people complain, because they get a new home with central heat, A/C. a western kitchen and bathroom, large double-paned windows, 9 foot ceilings, located in a convenient planned community. I know. I own and live in one. There is no property tax, and utilities are very cheap.
"There is relocation assistance in the interim. A lot of people have become instantly rich this way. Very few people complain, because they get a new home with central heat . . ."
Is the Chinese gooberment paying you by the word or by the lie? I suppose it would come to about the same. If "very few complain," it's because they're afraid of what local corrupt officials will do to them or their loved ones.
The Chinese people whom I meet who are flocking to where I live (Silicon Valley) do not seem to have your happy view of China as a place to raise their kids or keep their assets; they are doing their best to get the hell out.
The history of immigrants coming to America is a story of losers. the people who have nice lives do not leave their home. Just like it says on the Statue Of liberty, the "wretched refuse" flock to America where the streets are paved with gold. Some very wealthy Chinese who have ill-gotten gains are very afraid of the crackdown on corruption and are fleeing. of course they will not say "I ripped off the banks and thousands of investors". They tell stories to mke China look bad and Americans believe them.
I can tell from your remarks about people in China being afraid to speak their mind that you have never spent much time there. Anybody who contradicts your 1956 Cold War version of China is a government tool, in your little mind.
Stay in your trailer park and never travel. And kjeep that Fox News turned up real loud.
China gets GSE loans printed... The whole thing is absurd.... GOLD and Silver are not money.... WTF I wonder what "Sweet Caroline" sounds like in Chinese" Well TPP will keep the copyright IP legal theft going in shadows for longer than I will live... Somehow my sense is the Chinese 2000 years of history will manage to roll heads so to speak.
Banking, Corruption, Debt, Despotism, Economics, Illuminati, Power, Rothschild, Slavery, Tyranny
"The Rothschilds, and that class of money-lenders of whom they are the representatives and agents -- men who never think of lending a shilling to their next-door neighbors, for purposes of honest industry, unless upon the most ample security, and at the highest rate of interest -- stand ready, at all times, to lend money in unlimited amounts to those robbers and murderers, who call themselves governments, to be expended in shooting down those who do not submit quietly to being robbed and enslaved." by: Lysander Spooner(1808-1887) Political theorist, activist, abolitionist Source: "No Treason #6" (1870) Rating: Categories: Banking, Corruption, Debt, Despotism, Economics, Illuminati, Power, Rothschild, Slavery, Tyranny
That chart is YoY.
2013 - 2014 = +18%
2014 - 2015 = -3.5%
Oh noes!!!! lol
Most of the world uses recourse loans which would alleviate this turning into a full-out banking crisis somewhat. Only in some US states do homebuyers have access to nonrecourse loans which provide an easier path to walking away from a mortgage and the resultant banking crisis.
Jail the banksters
Leave them right where they are so we can find them.
You put them into lockup and suddenly you have a facility full of con men fraudsters.
Besides, what else would they be good for, climate change studies?
I am beyond jail the banksters...something more permanent
What happened to you 'can't lose with properdeee"?
It's gone up forever, that means it can only go up forever.
True, but only if the pesky EXPONENTIAL doesn't get in the way.
China uses public credit and infrastructure to raise Standard of Living.
Their money supply is a mix of State Issued Yuans. There are four large STATE banks. They also have a mix of BIS style private banks. Whenever the private banks have “animal spirits” they are often reigned in by the State Banks Overlords. State Bank control simply raises reserve ratios and hence private bank credit formation then declines.
Some of the ghost cities were built with State Credit. The State Banks can easily erase these loans as they owe them to themselves. So, the ghost city narrative and how China is going into debt does not correlate to the Western experience, where housing debts are to private banks.
This article does not explain what type of debts they are. Also, we need to know where the debt instrument is being held, and what it is demanding. Fail.
So, as we know, China’s state banks can quickly put an end to any “private bank” credit bubbles. These bubbles chase real-estate, as this is the “asset” put on double entry ledger.
If one has a private bank credit economy, then it is a MUST that real estate is taxed. Otherwise, what is not taxed is pledged to banker in the form of raised prices. Housing and real estate buyers go into a bidding war, and the one who wins, is the one who pledges the most debt. In the case of bidding against a business or condo or the like, rents are increased and passed on to luckless tenants.
This action in West is particularly nauseating because it pushes prices, which then reflect on ledger, which then causes price inflation; Debtor later grabs money out of money supply to pass to banker for destruction. Banker only cares about the usury.
Hudson’s recommendation to China, and what is a real Chinese Weakness:
“In sum, while China has followed Western advice to privatize and decentralize much of its economy, the West has gone much further in relinquishing planning power from the government to the banking sector. And although local Chinese councils have been allowed to obtain revenue by selling land to developers, generating fees in property rights, this has left the land’s rising site value free of taxes. The nominal land-lease payments are more in the character of registration rights than actual land taxes.”
http://michael-hudson.com/2013/07/china-avoid-the-wests-debt-overhead-a-land-tax-is-needed-to-hold-down-housing-prices/
Trace the path from private banks to privately held real-estate. Then look to see what fees were paid. These could be one time fees to the Councils. If one time fees, then Chinese will suffer a fate similar to the West, although their State Banks may raise reserve ratios, thus helping extend bad fiscal policy.