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Crash Landing: China Home Prices Plunge At Fastest Pace On Record, Surpass Post-Lehman Collapse
Less than three weeks ago, when the PBOC proceeded with its latest "surprise" rate cut, we showed a chart that should scare everyone who is hoping that China will avoid a hard-landing would prefer would never have been revealed: the annual collapse in Chinese home prices is now so sharp and so widespread, that it has surpassed the housing collapse in the aftermath of the Lehman collapse."
Overnight things went from bad to worse, when China's National Bureau of Statistics reported that contrary to hopes for a modest rebound, China's average new home prices fell at the fastest pace on record in February from a year earlier.
As Reuters reported earlier, average new home prices in China's 70 major cities dropped 5.7 percent last month from a year ago, the sixth consecutive fall, following January's 5.1 percent decline. It was the biggest annual decline in the nationwide survey since it began in 2011.
The monthly fall in February from January was 0.4 percent, the same as in the previous month, and pointing to sustained risks to the government's new 7 percent economic growth target for the year. The property sector accounts for some 15 percent of China's gross domestic product (GDP).
The economic slump continues to impact China's corporations, and the record fall coincided with news that Chinese banks have extended Evergrande Real Estate Group 100 billion yuan ($16 billion) in credit, as the real estate slump extends to one of the country's biggest and most indebted property developers. This leave many wondering how much more pain can China's housing industry take before a wholesale government bailout is inevitable.
Putting things in perspective, on Monday we showed just how massive the impact of China's housing bubble burst is on the economy, when we reported that government revenue from land sales dropped 36.2% to 455.3 billion yuan - far, far worse than the worst expectation.
Some more color from Goldman on the housing collapse in China:
On a sequential basis, housing prices in the primary market fell 0.4% mom (weighted by population, seasonally adjusted) in February, similar to the magnitude of decline in January. 67 out of 70 cities monitored by China’s National Bureau of Statistics (NBS) saw housing prices fall from the previous month (vs. 65 out of 70 cities in January). The largest month-over-month price fall came from Dandong (based on sequential price changes after adjusting for seasonality and the Chinese New Year holiday), a lower tier city in Liaoning Province.
On a year-over-year, population-weighted basis, housing prices were down -5.6% (vs. -5.0% yoy in January). Hangzhou continued to be the city with the largest price correction, with the yoy housing price down 10.4%, vs. 10.1% in January.
There is reality... and then there is hope:
Liu Jianwei, a senior statistician at the NBS, said in a statement on Wednesday that sales in March will show a significant seasonal rebound from February's Lunar New Year pause. "Although the overall market eased in the beginning of the year, as policies loosen further and new launches pick up in March, the property market is expected to see a recovery," said consultancy China Real Estate Index System (CREIS).
As for the market, stocks couldn't be happier by the devastating news. The reason - more PBOC intervention is assured (and, as we predicted, ultimately QE by the PBOC):
Chinese real estate stocks .CSI300REI jumped in response to the price news, with the Bank of Communications expecting the government will announce more measures to bolster the market, including lowering taxes and loosening requirements for mortgage lending.
"Over the weekend, Premier Li Keqiang vowed to support the economy if it continues to slide, so the worse the economic data, the sooner stimulus policies will be rolled out," said Luo Wenbo, analyst at Qilu Securities.
"Investors wouldn't have been so bold if the premier hadn't made that promise.
What investors? Just call them BTFD automatons for whom every incremental piece of horrible economic news is just what the central planner ordered. End result: the Shanghai Composite closed up 2.1% to the highest since 2008.
In other words, if and when China finally reveals that it is currently not in hard, but crash landing mode, with GDP as Cornerstone estimated at under 3%, the SHCOMP will simply find itself offerless and stop for trading as everyone puts all their remaining cash in the Chinese stock market, that one final bubble now that the housing bubble is a distant memory.
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well that is going to be great for the market now that up is down and down is up!
a lot of good news this morning
not crushing fast enough
Noes my chance to pick up one of the ghost cities on the cheap. Would make a really cool paintball park.
Dude I'll partner with you
and since Amerikans can't find reasonable
rental properties to live, we'll move them
all there where they will work in the city
and be paid by the never ending printing press.
We better move fast before Blackstone buys
them up as they r now our biggest landlord and
need to branch out. How about it?
built by slaves with chinese drywall and liquidated lumber, who wants these death traps?
It is the "year of the goat"
Since ... (When?)
ZH can't be predicting the Chinese taking over the world in 10 years on one hand all while coming up with a rhetoric of Chinese crash landing on another.
neither is going to happen
you gotta know how to take your porn
"Welcome back my friends to the show that never ends, we're so glad you could attend step inside, step inside."
zerohedge is Not monolithic, so yes it can, whatever it is...
China vs Japan
China vs Korea
China vs USSA
USSA vs Russia
Israel vs Iran
USSA vs Iran
War!
Step right up and take your pic
Great news, Comrades, we have synced up with our Marxist Brothers in China!
The Chinese real estate bubble is easily the largest bubble ever created. The price of land alone in Beijing was $20 trillion a couple of years ago. The current value of all Chinese real estate must be approaching $200 trillion. A 10% correction will cost $20 trillion or about 210% of Chinese GDP.
Has the land value of Beijing surpassed the annual GDP ofUS?http://en.people.cn/90778/8383855.html
there was a comparison like that in 1990 for Tokyo vs the entire US property market - same strange aggregate valuations
momentum investing is an interesting phenomena
If Netanyahu's opponent had won in Israel, it would be all over Zero Hedge.
That's why Zero Hedge is less about news and commentary and more about propaganda and commentary.
betcha Bibi celebrates his victory at the Rothschilds Hotel located conveniently on Rothschilds Blvd.
It's all a big conspiracy, isn't it, Bob?
Look, no one really cares about a liar being re-elected, he is a politician after all, like all the politicians in the world he first cares about himself. The sad truth is that a lot of good folks, both Jews and non-Jews will be affected.
Netanyahu's Tall Tales On Iran And Iraq
In 1992, Benjamin Netanyahu wasn't yet Prime Minister; he was a Likud member of the Knesset, Israel's parliament. He told his fellow lawmakers that Iran was 3 to 5 years away from a nuclear bomb, and that the only way to stop them was for them to be “uprooted by an international front headed by the U.S.”
By 1996, Netanyahu rode a right-wing wave in Israel and was elected Prime Minister; in July he was given his first opportunity to address the U.S. Congress. In his speech, he said Iran was the “most dangerous” of Middle East regimes and warned about the consequences of it acquiring nuclear weapons, saying that it would create “catastrophic consequences...for all of mankind.” He drew on many of the same themes he first introduced in his book Fighting Terrorism: How Democracies Can Defeat Domestic and International Terrorists. In that book he warned that “hundreds of thousands, and possibly millions” would perish if Iran were to possess nuclear weapons.
In both his speech to Congress and his book published a year earlier, he dedicated a significant amount of words to the supposed Iraq WMD threat as well. In 2002, he appeared before Congress as a private citizen to join a Congressional panel looking into the alleged threat from Iraq.
Here's a snippet from his testimony at that time:
Don't let the door hit you where the good Lord split you.
But but Warren Pollock said Israel is now irrrelevant.
https://www.youtube.com/watch?v=orOujvNK8bo
LTCM
Did it snow in China too?
Obviously Fed doesn't know what it wants to do, or can do. Has to lie about economic indicators in order to leave the "option" of interest rate hikes on the table and people guessing, but main motivating factor will be doing what it thinks will keep the stock market at current levels, gold price suppressed, and ducking the other world central banks NIRP/ZIRP which they have fired right back at US, suppressive M-60 .308 style, forcing the FED to hide in its fox hole.
Five mortgages on one condo that’s now under water. That is a bitch. Better take the kids out of school so they can get jobs building condos to help pay off the debt.
Timber!!!!
But will the contagion spread to Irvine?
5% drop?
BFD!
Hey no worries. As mortgage rates go to zero, house prices can go to infinity. It is just the way math works. Leveraged (mortgaged) prices are really on the imaginary axis, and of course dependent on an unending supply of Greater Fools (no problem so far). Ponzi'es away!!
As mortgage rates go to zero, house prices can go to infinity.
Unless hedge funds (and central banks) buy them like stocks I don't think so.
http://www.nytimes.com/2015/03/18/business/international/china-developer...
REWRITE the DEAL!
If I could get a 20 year, interest only (at NIRP rates), no money down loan I could finally buy my dream home.
Other than that, I'm renting, I guess.
I was kinda thinking, while beating my head against a desk in engineering school for 5 years, that I'd be living better than the wetbacks some day for all my hard work.
I was wrong. :-(
Anyone who has seen the movie 'face off' will get this quote: Home prices Diiieeeeeeeeeeeeeeeeeeeee.
It's odd to me that China, a country that recognizes no higher power than its own political elite, seemingly reports true numbers no matter how painful? Or am I missing something?
Your definitely missing something if you believe the Chinese government numbers. Then again if you take away mark to market maybe all those ghost cities are worth 3 times what they were built and sold for. Add in rehypothecation and I think the Chinese numbers are as sound as what the BLS puts out every month. Can't wait to see how that all shakes out. Imagine seven banks all owed money on the same empty house.
Then again the PBoC can just print another 10 or 20 trillion Yuan, to make it all good.
Reserve currency indeed!! Is there any doubt the Chinese will just print another 10 trillion Yuan to keep up appearances. Wondering how those ghost cities are working out. You mean that nobody living in these empty places make it used after all, who'd have thought it.
All things are not equal.
Comparing Chinese housing markets to US housing markets on a graph and saying it may somehow correlate to what unraveled in the markets here (then spread) might not make sense at all.
Real estate investments is China are not leveraged like they were in the US. There are no LIAR loans, they don't take 10% down, etc... Many Chinese purchased houses and apartments with cash outright.
I am not saying that investors won't go running for the exits to preserve capital returns, but the Chinese wont necessarily have to rig the laws (eliminate mark to market) or bale out zombie TBTJ/TBTF banks (TARP/$12T of FED backstop behind the curtain). Gov. debt money injection perhaps, but a systemic unraveling of banks and derivatives due to upside down loans, probably not to the extent we saw in the USSA.
Then again, what a geopolitical opportunity for the ZOG. The Zeocon psychopaths in D.C. would surely do what ever they could to fan the flames of a systemic problem in China. They have proved time and time again they would slit through they're own throats to get to the throat behind them.
Just saying.
Mortgages are a new thing in China. Most people own their homes outright, and there is no property tax. About 65% of the people pay no rent or mortgage. The home ownership rate is about 130%, because so many people own second and third properties. That's why you see "ghost cities" Most of those units are paid for in cash and are intentionally vacant.
China has a plan to move 300 million rural people into urban areas. Having vacant units in advance of this is a sign of good planning, not the opposite.
Isn’t everything made in China?
Why not a global crisis then?
Run, Wang Fu, Run!