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Crash Landing: China Home Prices Plunge At Fastest Pace On Record, Surpass Post-Lehman Collapse

Tyler Durden's picture




 

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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Wed, 03/18/2015 - 08:56 | 5901558 venturen
venturen's picture

well that is going to be great for the market now that up is down and down is up!

Wed, 03/18/2015 - 09:03 | 5901577 SickDollar
SickDollar's picture

a lot of good news this morning

not crushing fast enough

Wed, 03/18/2015 - 09:42 | 5901733 General Decline
General Decline's picture

Noes my chance to pick up one of the ghost cities on the cheap. Would make a really cool paintball park.

Wed, 03/18/2015 - 10:50 | 5902021 Ward cleaver
Ward cleaver's picture

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?

Wed, 03/18/2015 - 12:05 | 5902330 Four chan
Four chan's picture

built by slaves with chinese drywall and liquidated lumber, who wants these death traps?

Wed, 03/18/2015 - 09:34 | 5901689 SethDealer
SethDealer's picture

It is the "year of the goat"

Wed, 03/18/2015 - 09:50 | 5901769 NoVa
NoVa's picture

Since ...  (When?)

 

Wed, 03/18/2015 - 09:02 | 5901569 ComplexCat
ComplexCat's picture

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.

Wed, 03/18/2015 - 09:16 | 5901618 Wild Theories
Wild Theories's picture

neither is going to happen

you gotta know how to take your porn

Wed, 03/18/2015 - 09:31 | 5901683 forwardho
forwardho's picture

"Welcome back my friends to the show that never ends, we're so glad you could attend step inside, step inside."

 

Wed, 03/18/2015 - 10:32 | 5901945 clawsthatscratch
clawsthatscratch's picture

zerohedge is Not monolithic, so yes it can, whatever it is...

Wed, 03/18/2015 - 09:02 | 5901571 y3maxx
y3maxx's picture

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

Wed, 03/18/2015 - 09:04 | 5901578 lakecity55
lakecity55's picture

Great news, Comrades, we have synced up with our Marxist Brothers in China!

Wed, 03/18/2015 - 09:06 | 5901582 JustObserving
JustObserving's picture

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

Wed, 03/18/2015 - 09:34 | 5901680 Omen IV
Omen IV's picture

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

Wed, 03/18/2015 - 09:11 | 5901594 iofera
iofera's picture

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.

Wed, 03/18/2015 - 09:23 | 5901643 Usurious
Usurious's picture

betcha Bibi celebrates his victory at the Rothschilds Hotel located conveniently on Rothschilds Blvd.

Wed, 03/18/2015 - 11:09 | 5902100 iofera
iofera's picture

It's all a big conspiracy, isn't it, Bob?

Wed, 03/18/2015 - 13:12 | 5902626 Gambit
Gambit's picture

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:

There’s no question that [Saddam] has not given upon on his nuclear program, not [sic] whatsoever. There is also no question that he was not satisfied with the arsenal of chemical and biological weapons that he had and was trying to perfect them constantly…So I think, frankly, it is not serious to assume that this man, who 20 years ago was very close to producing an atomic bomb, spent the last 20 years sitting on his hands. He has not. And every indication we have is that he is pursuing, pursuing with abandon, pursuing with every ounce of effort, the establishment of weapons of mass destruction, including nuclear weapons. If anyone makes an opposite assumption or cannot draw the lines connecting the dots, that is simply not an objective assessment of what has happened. Saddam is hell-bent on achieving atomic bombs, atomic capabilities, as soon as he can

Wed, 03/18/2015 - 09:25 | 5901655 forwardho
forwardho's picture

Don't let the door hit you where the good Lord split you.

 

Wed, 03/18/2015 - 09:32 | 5901687 Hubbs
Hubbs's picture

But but Warren Pollock said Israel is now irrrelevant.

 

https://www.youtube.com/watch?v=orOujvNK8bo

Wed, 03/18/2015 - 09:14 | 5901611 FranSix
FranSix's picture

LTCM

Wed, 03/18/2015 - 09:17 | 5901626 autofixer
autofixer's picture

Did it snow in China too? 

Wed, 03/18/2015 - 09:18 | 5901632 Hubbs
Hubbs's picture

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.

Wed, 03/18/2015 - 10:12 | 5901853 Downtoolong
Downtoolong's picture

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.   

Wed, 03/18/2015 - 10:16 | 5901867 fastrakn1
fastrakn1's picture

Timber!!!!

Wed, 03/18/2015 - 10:29 | 5901927 markar
markar's picture

But will the contagion spread to Irvine?

Wed, 03/18/2015 - 10:33 | 5901947 roddy6667
roddy6667's picture

5% drop?

BFD!

Wed, 03/18/2015 - 10:35 | 5901956 AbbeBrel
AbbeBrel's picture

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!!

Wed, 03/18/2015 - 10:56 | 5902045 markar
markar's picture

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.

Wed, 03/18/2015 - 12:45 | 5902514 divingengineer
divingengineer's picture

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. :-(

 

Wed, 03/18/2015 - 10:41 | 5901984 Banker Buster
Banker Buster's picture

Anyone who has seen the movie 'face off' will get this quote:  Home prices Diiieeeeeeeeeeeeeeeeeeeee.

Wed, 03/18/2015 - 10:52 | 5902020 ChacoFunFact
ChacoFunFact's picture

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?  

Wed, 03/18/2015 - 11:18 | 5902135 nakki
nakki's picture

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.

Wed, 03/18/2015 - 11:19 | 5902069 nakki
nakki's picture

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.

Wed, 03/18/2015 - 11:42 | 5902249 CitizenPete
CitizenPete's picture

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.

Wed, 03/18/2015 - 21:06 | 5904493 roddy6667
roddy6667's picture

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.

Wed, 03/18/2015 - 12:04 | 5902327 SillyWabbits
SillyWabbits's picture

Isn’t everything made in China?

Why not a global crisis then?

Wed, 03/18/2015 - 12:12 | 5902372 Never One Roach
Never One Roach's picture

Run, Wang Fu, Run!

Do NOT follow this link or you will be banned from the site!