Western strategists and talking heads, we are sure, will know better and continue to pitch China as the renewed engine of growth in the world and that everything will be fine... but when the country's largest property developer says, the "golden era" for China’s property market has passed, adding that "The period in which everybody makes money out of property is gone," perhaps it is time to listen? Of course, we are sure there will be an orderly exit (just as there was in CNY last night which crumbled to 19-month lows) but as China Vanke Co's Yu Liang warns, "the phase where 'whoever buys makes money' is gone."
China's largest property developer warns that China's property bubble is bursting... (via Bloomberg) [11]
The “golden era” for China’s property market has passed, according to China Vanke Co., the nation’s biggest developer, which is shifting its focus to homes for owner occupiers rather than investors.
“The period in which everybody makes money out of property is gone,” President Yu Liang told reporters May 26 in Dongguan, a southern city in Guangdong province. “Vanke will take a cautiously optimistic approach to face the slowdown and target those buyers who need homes for self-use.”
...
“He should have seen some signs since it’s indeed difficult to make money now compared with before,” said Dai Fang, a Shanghai-based analyst at Zheshang Securities Co. “Growth we’ve seen before is no longer possible and you won’t be seeing blossoms everywhere again,” he added, using a Chinese idiom to refer to the property boom seen in every city.
...
The growth in the real estate industry will slow and the phase where “whoever buys makes money” is gone...
New construction has fallen 22 percent and sales, including commercial real estate, have slumped 7.8 percent this year.
Song Weiping, who is selling most of his stake in luxury-property developer Greentown China Holdings and is stepping down as chairman amid a worsening market downturn, told a news briefing that local and central governments were to blame for the industry's problems, having interfered too much in the market.
...Mr. Song said he is tired of operating in an environment in which the market isn't free.
...Mr. Song also vented his frustrations with Hangzhou and other local governments that sell land to developers at high prices and then force them to use some of the land for low-income housing. "How could they expect us to build social (low-income) housing on the same plot of land that costs 50,000 yuan (about $8,000) per square meter? Who would these homes be distributed to?"
"Beijing and Shanghai are the same," said Mr. Song. "Are they trying to kill us?"
And even the average middle-class joe in China is getting it (via WSJ) [13],
"I wouldn't buy another home even with the loosening of restrictions," said Mr. Ye, who bought his first apartment in 2012 for 14,000 yuan ($2,250) per square meter. Now, a developer is offering a comparable home nearby for 25% less.
"I'm a victim of oversupply," Mr. Ye said.
...
Property developers face a view among consumers that Chinese real-estate prices have peaked..."My last offer was 800,000 yuan" nearly a year ago, Ms. Fan said. "I regret not selling then. I hope the market recovers soon."
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"The downturn this time is more serious compared to 2008 and 2011," said Barclays Bank analyst Alvin Wong.
...
"The very fact that the PBOC had to provide that window guidance means there is a problem," said Xiang Songzuo, chief economist at Agricultural Bank of China Ltd., using industry jargon for central bank jawboning. "Now, what you're hearing from banks' local branches is that 'we just don't think the property is worth that much money anymore.'"
...
"I don't believe that the local governments will be allowed to reverse the home purchase restrictions,"
But still - PMIs were both above and below 50 and US equities are at record highs, so what could possibly go wrong? How can China's real estate bubble be on the verge of collapse with stocks around the world so high? (Remember 2007/8 in the US - who could have seen that coming)... shrugging off fears because Chinese property is not so levered and derivatived as US property was... think again... it is the base collateral for so much of the shadow banking system (along with endless piles of commodities) that if it goes the contagion will be widespread (as well as the fact that overseas speculative leveraged capital has flooded in to this trade and now wth weakening CNY, capital losses are growing on what was a one-way trade for years).
Still don't believe they have a problem?
China: Non-Performing Loans on the Rise pic.twitter.com/H4C7FarSnW [14]
— Michael McDonough (@M_McDonough) May 28, 2014 [15]
As we explained in great detail here [16], the PBOC kicked the hornet's nest and the end of the can-kicking road is nigh.