Chinese New Home Prices Soar by 12.4% in December -- Higher by 25% in Tier One Cities

The_Real_Fly's picture

What can go wrong, after all? The Chinese government has already informed us their real estate market, which is being driven by records amount of debt, is NOT in a bubble, so relax, chill and enjoy a large overflowing bowl of wanton soup.

Take Larry Hu, for example, economist from Macquarie. He posited, back in October, that the +25% year over year price jumps for Chinese property wasn't indicative of a bubble...because MUH lack of supply. Perfectly normal stuff.

Source: BBG


Big cities like Shanghai are experiencing net immigration with only limited blocks of land coming on the market. “If Shanghai sells only one parcel of land in a year, the price of the land must be extremely high – this is not a bubble; this is a shortage of supply,” Hu said.

We can revisit a litany of smug remarks by any number of US economists before the US housing market collapsed -- almost mocking those who warned against unchecked gains in property prices.

Take, for example, the missives of Jonathan McCarthy and Richard W. Peach -- senior economists at the NY Fed.

"Home prices have been rising strongly since the mid-1990s, prompting concerns that a bubble exists in this asset class and that home prices are vulnerable to a collapse that could harm the U.S. economy.
"A close analysis of the U.S. housing market in recent years, however, finds little basis for such concerns. The marked upturn in home prices is largely attributable to strong market fundamentals: Home prices have essentially moved in line with increases in family income and declines in nominal mortgage interest rates."

Or, we can look back at the advice of Chris Flanagan, head of ABS Research, JP Morgan -- and laugh at how stupid he was.

"Based on what we know and see in terms of employment and interest rates, it is extremely difficult to see how five years from now we could be looking back and observing a historical 5-year growth rate of, say, less than 5%. That should be more than adequate to support the continued good credit performance of sub-prime mortgage pools.
"It is important to understand — we can contemplate home price growth rates declining, albeit modestly, but we do NOT envision home prices declining!"

This out of China tonight -- record home prices.

Source: Beijing Monitoring Desk
Average new home prices in China's 70 major cities rose 12.4 percent in December from a year earlier, slowing slightly from a 12.6 percent increase in November, an official survey showed on Wednesday.
Compared with a month earlier, home prices rose 0.3 percent nationwide, slowing from November's 0.6 percent, according to Reuters calculations from data issued by the National Bureau of Statistics (NBS). Shenzhen, Shanghai and Beijing prices rose 23.5 percent, 26.5 percent and 25.9 percent, respectively, from a year earlier.
Monthly growth in Shanghai and Shenzhen slowed but was unchanged in Beijing as local governments' tightening measures took effect. China relied heavily on a surging real estate market and government stimulus to help drive economic growth in 2016, but policymakers have grown concerned that the property frenzy will fuel price bubbles and risk a market crash, with serious consequences for the broader economy. Soaring home prices have prompted more than 20 Chinese cities to tighten lending requirements on house purchases, while regulators have told banks to strengthen their risk management on property loans.

Hindsight is 20/20 and it's never easy to time tops or bottoms. But this is child's play. None of these gains are due to some grass roots renaissance, thanks to some technological breakthrough or keystone event that caused prices to jump. The price jumps in China are due to record levels of debt, leverage, greed, avarice, and wanton chicanery.
It's most definitely a bubble -- whether it cracks this year or not is anyone's guess.

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Lost in translation's picture

Was in the city of Chino Hills, CA yesterday.  Mrs. Lost needed to see the physical therapist there. 

Was shocked to see the number of mainland Chinese there, especially pregnant females choking the public health women's clinic in the building wing opposite the one we were in.  Not a word of English heard, in any hallway, but plenty of Beijing accents, though. 

Told the Mrs., "this town should be named Communist China Hills."

McDuff71's picture

...nice - the Chinese bubble is very similar to the one in my backyard here in Sydney - that cheep QE money needed to get parked some place right?? it's going to be rough when the tide goes out BUT therein lies the opportunity...

Iconoclast's picture

Surely the next big short is the same as the last big short; property? But this time shorting China.

The Real Tony's picture

The good thing about owning a house in China is when every fucking Chink sells at the same time (they all buy at the same time) all they have to do is climb on top of their roof of their house and jump off to kill themselves. "Everything these Chinks do is create ponzi's" (in Chinese syntax) because not a single one of them can think for themselves and each piece of shit copies each other.

Aussiekiwi's picture

Yes the Chinese have a habit of all flocking together, there is a joke in there somewhere....but in their defense they have never experienced a major housing collapse and have no reason to doubt that if one occurs that the Government will bail the market out.

JamesBond's picture

After a certain number of years, the government owns your home in china and can take it away on a moments notice.


Cheers to communism.



VD's picture

between the 30yr mortgage (which after 30yrs is like paying for over 2 homes) and prop taxes, you don't own shit anyway.....miss an exorbitant prop tax payment or two, see what happens...

and look st S&P500, as 0bammy said other day, it TRIPLED under his "Watch" -- that's more a bubble than any chinese housing "market".....that right there's some radical community organizing on the wall......

ebear's picture

Nail Houses.

Look it up.