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China property bubble set to burst. Australia to pop too.
Topic Started: 14 Mar 2013, 03:13 PM (20,509 Views)
Ex BP Golly
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Bobby
14 Mar 2013, 10:13 PM
China is the bubble of all bubbles. Just a reminder of the key section from the 60 minutes piece the other day:

http://www.zerohedge.com/news/2013-03-04/chinas-housing-bubble-goes-mainstream-america?page=1

“Lesley Stahl: Are homes in China too expensive today?

Wang Shi: Yeah.

Lesley Stahl: Here’s a number I saw. A typical apartment in Shanghai costs about 45 times the average resident’s annual salary.

Wang Shi: Even higher, even higher.

Lesley Stahl: What does that mean for your economy if it’s just too expensive for the vast majority of people to buy?

Wang Shi: I think that dangerous.

Lesley Stahl: Dangerous.”

What bubble? 45 x annual salary is the new normal… it must be a shortage surely. That’s what half the property perma-bulls on this website commenting daily tell us after all,

that housing prices reflect ‘fundamentals’ based on SUPPLY and DEMAND.

Yet, here we have entire empty cities with apartments at the bargain basement price of a few 100K a pop, in areas were people earn $2 a day. LOL
I thought the most important bit was when he was praised as being the biggest developer in the world, and he laughed and said "quantity not quality".

This is the biggest thing for Chinese, you tell them something is the most expensive in the world, the frenzied crowd will stampede to hoard it.....you tell them it is fake!



K-town
6 May 2013, 09:24 AM
I know this is your new thing but would you please look up what 'where for art thou' means? Ta.
"bulls, bulls, why for are you bulls"?

Works for me.

Sweet that he worries for bulls so much.
Edited by Ex BP Golly, 6 May 2013, 09:44 AM.
WHAT WOULD EDDIE DO? MAAAATE!
Share a cot with Milton?
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Timo
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timmy
6 May 2013, 09:26 AM
Ok if theres no bust in the second half of this year you have to post on here that you are a complete tool and were wrong on house prices
Oh ok timmy @ 01.30am on the 28th of November it will crash.

Your a total fool.

I will be right, now, in 6 months, 12 months and 10 years from now, prices will continue to drop and capital gains will be resigned to the history books.

After a bubble has burst, no one denies that it existed. But before it does, the popular refrain is that though bubbles existed elsewhere in the world, “there’s no bubble here”. So housing bubbles are admitted to have existed in Japan, the USA, Spain and Ireland – because they’ve already burst.
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Pig Iron
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Bogan scum

Timo
6 May 2013, 10:36 PM
Oh ok timmy @ 01.30am on the 28th of November it will crash.

Your a total fool.

I will be right, now, in 6 months, 12 months and 10 years from now, prices will continue to drop and capital gains will be resigned to the history books.
Prices are rising, every index says this. Are you so blinded by rage fuuu that you can't admit even this simple fact?
You have been conned by the bears, i would be angry to.
I am the love child of Tony Abbott and Pauline Hanson
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Admin
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China Home Prices Climb as Buyers Defy Government Curbs

By Bloomberg News - May 18, 2013 1:02 PM ET

China’s new home prices rose in all but two cities in April, with housing values accelerating in key centers including Beijing and Shanghai as buyers defied the government’s latest round of property measures.

Prices climbed in 68 of the 70 cities the government tracked last month from a year earlier, the National Bureau of Statistics said in a statement today. The same number of cities posted gains in March, the most since September 2011.

Thirty-five provincial-level cities have issued details of property curbs by an April 1 deadline in response to the central government’s measures imposed in March. Only the capital city of Beijing issued the toughest measures, raising the down payment on second homes and strictly enforcing a 20 percent capital gains tax on existing homes, according to Centaline Property Agency Ltd., the country’s biggest real estate agency.

“Home prices continued to climb because the direct impact of the curbs is hitting on home sales, while it’ll take several more months to slow the prices,” said Lan Shen, a Shanghai-based economist at Standard Chartered Plc. “Policies haven’t been strictly enforced on the local level.”

The southern business city of Guangzhou recorded the biggest increase at 14 percent from a year earlier, and those in Beijing jumped 10 percent. Home prices in Shanghai climbed 8.5 percent, and all the cities that recorded gains had their biggest advances since the government changed its methodology for the data in January 2011.

Existing Homes

China switched from reporting one average price for the nation to those for 70 cities it tracked at the start of 2011.

The biggest decline in new home prices last month was in Wenzhou, where they fell 5.7 percent from a year earlier, according to the data.

Existing home prices rose 11 percent in Beijing last month from a year ago and those in Shanghai increased 8.5 percent, according to the data. They climbed 8.6 percent in Guangzhou and 7.3 percent in Shenzhen, both located in southern China near Hong Kong.

Private data have also shown price gains are accelerating. April home prices jumped 5.3 percent from a year earlier, the biggest increase since housing costs ended eight months of declines in December, according to SouFun Holdings Ltd. (SFUN), the nation’s biggest real estate website owner.

While China’s home prices continued to climb from a year ago, analysts including Mizuho Securities Asia Ltd.’s Alan Jin said the increases slowed from March.

Unrealistic Expectations

Home prices increased in 67 cities in April from a month ago, compared with 68 in March. Housing values in Beijing rose 1.4 percent in April from a month ago, compared with 2.1 percent in March, while those in Shanghai added 1.7 percent last month from 2.7 percent in March.

“It’ll be unrealistic to expect home prices to fall,” Hong Kong-based Jin said in a phone interview today. “As long as the rate is in line with income growth, it’s acceptable. It’s unlikely for the government to take more actions soon, especially as the typically low season of the property market in the summer approaches.”

Home sales transaction value fell 13 percent in April from the previous month as the new property curbs started to take effect, the statistics bureau reported on May 13.

“The latest round of the measures were announced in early March and we are really waiting to see the true impact,” Chris Brooke, chief executive officer for China at CBRE Group Inc., said in a Bloomberg Television interview in Beijing yesterday. “There’s beginning to be some impact of the latest measures, although it’s really a slow of the rate of the growth rather than controlling or reducing the actual prices.”

Moody’s Investors Service and Standard & Poor’s both said last week that the government curbs will slow down property sales growth this year.

To contact Bloomberg News staff for this story: Bonnie Cao in Shanghai at bcao4@bloomberg.net

Read more: http://www.bloomberg.com/news/2013-05-18/china-home-prices-climb-as-buyers-defy-government-curbs.html
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Mike
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That is a very good result for Chima, declining volume yet prices continue to rise. The price rises though are reasonable considering China fast growing economy and income growth much higher then almost anywhere else.

I actually think China needs to stop trying to control the market, let it play out, rise and fall as demand ebbs and flows as prices rise, overshoot and reduce to levels that more buyers enter the market.
http://mike-globaleconomy.blogspot.com.au/
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Beijing Caps Home Prices to Control Demand: Mortgages

By Bloomberg News - Jun 4, 2013 2:49 PM ET

Beijing, which already has China’s strictest real estate curbs, is being forced to take additional steps to contain surging home prices as demands for record-high down payments fail to deter buyers.

The city has enforced citywide price caps since March by withholding presale permits for any new project asking selling prices authorities deem too high, according to developer Sunac China Holdings Ltd. (1918) and realtor Centaline Group. Local officials will need further tightening as they struggle to meet this year’s target of keeping prices unchanged from last year, said Bacic & 5i5j Group, the city’s second-biggest property broker.

The failure of official curbs to stem price increases in the nation’s capital highlights the government’s struggle to keep housing affordable as urbanization sends waves of rural workers into China’s largest cities. New-home prices in Beijing rose by 3.1 percent in April from the previous month, the biggest gain among the nation’s four so-called first-tier cities, and climbed by the most after Guangzhou in May, according to SouFun Holdings Ltd. (SFUN) They rose in each of the first five months of this year.

“As the Chinese capital, and a city widely watched for the direction of property curbs, Beijing is under a lot of pressure to tighten further as it’s still leading price increases,” said Luo Yu, a Shanghai-based analyst at CEBM Group, an advisory company that covers industries including property. “More cities may follow suit with price caps.”
Nuclear Weapons

As the nation’s economic growth moderates, the possibility of monetary tightening or a nationwide property tax -- dubbed by Societe Generale SA “nuclear weapons” -- diminishes, leaving local authorities little choice but to tighten short-term price restrictions amid a worsening supply shortage.

“If tightening in the property market is too stringent, it would impact growth,” Citigroup Inc. analysts, led by Oscar Choi, wrote in a May 6 report. China’s economic expansion slowed unexpectedly in the first quarter as gains in factory output and consumption weakened.

New-home price gains in April, the biggest since they reversed declines in November, came even after Beijing on April 8 raised the minimum down payment on second-home mortgages to a record 70 percent and banned single-person households from buying more than one residence, a response to former Premier Wen Jiabao’s urge to counter surging values.

Rejecting Proposals

Beijing, the nation’s third-most populous city, is the only city that enforces price caps in earnest, according to Bacic & 5i5j. Guangzhou and Shenzhen in the southern province of Guangdong are rejecting presale permits for some projects seen as too expensive, CEBM’s Luo said. The three cities, along with Shanghai, are considered first-tier.

In one of his last policies, Wen, replaced by Li Keqiang less than a month later, on Feb. 20 called on city governments to “decisively” curb real estate speculation after home prices surged the most in two years in January.

Beijing followed with the toughest curbs among the 35 provincial-level cities that responded with price-control targets, becoming the only region to raise the minimum down payment on second homes from 60 percent and to enforce a 20 percent capital-gains tax on existing homes, according to Centaline Property Agency Ltd., China’s biggest property agency.

Still, new-home prices in the city of 19.6 million, jumped 10.3 percent in April from a year earlier, the biggest rise after Guangzhou and Shenzhen, the National Bureau of Statistics said May 18. Prices of existing homes jumped 10.9 percent, the most since they reversed declines in December, and the greatest gain among all the 70 cities tracked by the government.

Buyer Expectations

A 156-square-meter (1,679-square-foot), three-bedroom apartment in Vanke Park No. 5, on the north border of Beijing’s central business district, has risen to about 6.4 million yuan ($1 million), according to Homelink Real Estate Agency Co. That compares to about 2.8 million yuan five years ago and about 1.2 million yuan when the project, built by China Vanke Co., the nation’s biggest developer, was first sold in 2000.

The average new home price in Beijing rose to 27,349 yuan a square meter last month, more than sixfold the level in Hengshui, a city in neighboring Hebei province, according to SouFun, the country’s biggest real estate website owner.

More than 60 percent of participants in SouFun’s online survey conducted in April expected Beijing’s new-home prices to rise further after the government’s recent curbs because a capital-gains tax on existing properties will drive up demand.

Mature Markets

“Unlike mature foreign markets, the main determining factor in China’s real estate market is not interest rates, but expectations on the market going forward,” said Liu Yuan, Shanghai-based director of Centaline’s research center. “The previous rounds of property curbs since 2005 have made it clear to the average homebuyers that simply increasing transaction costs won’t change the upward trend in home prices.”

Local governments’ measures are “much milder than expected,” and their price-control targets, mostly linked to the growth in disposable incomes, still allow price gains of as much as 15 percent, according to Citigroup. In the secondary market, surging demand for homes that qualify for exemption from the capital-gains tax has pushed their prices up by more than the new levy would cost in some regions, according to CEBM.

Only about 30 percent of demand now comes from second-home buyers, limiting the impact of the higher down payments, according to Centaline.

Root Cause

Underlying homebuyers’ expectations for higher prices is a persistent supply shortage that Bacic & 5i5j called the “root cause” for April’s price increases in the city.

The number of new homes available for sale fell by 21,406 units this year as new supply in the five months ended May 31 accounted for only 42 percent of total sales over the period, suggesting a “severe supply shortage,” Bacic & 515j said in a report e-mailed June 2. Sales of new apartments in Beijing excluding government-subsidized housing slumped 51 percent in April as buyers assessed the new curbs, Bacic & 515j said. They rebounded 6.2 percent last month from April.

While direct price intervention such as the price caps promises immediate statistical effect in slowing price gains, it also threatens to aggravate the supply shortage by delaying sales of new projects as cash-rich developers reject price cuts, according to Centaline and Bacic & 5i5j. Only 53 projects won presale permits in Beijing this year as of May 29, about half of the average January-to-May total and compared with about 150 that developers expected to open to subscription during the period, according to data compiled by Bacic & 5i5j.

Population Increase

Newly available homes were equivalent to 55 percent of housing sales in the first four months of this year in Beijing, about half of the average level since 2010, according to data compiled by Centaline to gauge whether supply is ample. That compares to 130 percent in Shenzhen and 69 percent in Guangzhou for the four months ended April 30, according to the data.

The city’s resident population expanded by 6.04 million in 10 years, more than twice the size of Chicago, to 19.6 million as of Nov. 1, 2010, according to data from China’s bureau of statistics and the U.S. Census Bureau. About 36 percent of Beijing’s residents moved in from other cities, while 86 percent live in the city’s urban areas, according to the data.

China must stick to its policy of curbing real estate speculation because the supply shortage in key cities “can hardly see any fundamental change” in the near term as the nation’s urbanization accelerates, the central government said in the Feb. 20 statement.

Beijing will suspend presale approvals for apartments whose target prices are “notably higher” than earlier selling prices of the same projects or nearby projects being sold, if the developer “doesn’t accept the guidance,” the municipal government said in a March 30 statement. Developers are finding it difficult to get approval for any 5 percent price increase, and nearly impossible for a 10 percent rise, CEBM’s Luo said.

Pushing Back

The government has been pushing back approvals for the second phase of a Beijing development that Sunac, the Tianjin-based developer part-owned by buyout-firm Bain Capital LLC, plans to sell for 38,000 yuan per square meter, compared with 30,200 yuan per square meter it was asking in September for the first phase, executives said.

Still, Sunac is not cutting prices because development costs, such as land, are rising, Chairman Sun Hongbin said in an April 22 interview in Beijing. The main reason for home-price gains is the scarcity of land, particularly in prime urban locations, he added.

Almost 30 percent of developers expected selling prices last month to rise from April, according to a CEBM report based on its monthly survey of 11 first- and second-tier cities.

Beijing on May 27 called off an auction of a residential land parcel, whose price would have exceeded 20,000 yuan a square meter of floor area and would’ve set a record for this year. Such a transaction would have triggered “market panic” that higher land costs would push up home prices further, Bacic & 5i5j said.

“The most direct, very administrative price caps are now the most important measure to damp home prices, which truly ran out of hand” early this year, said CEBM’s Luo. “They have to. Otherwise prices will keep rising, possibly at an accelerating pace, because the expectations are still out there.”

Read more: http://www.bloomberg.com/news/2013-06-03/beijing-caps-home-prices-to-control-demand-mortgages.html
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Sweetdish
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I dont think there is anyone disputing the fact that China has an almost biblical property bubble.

Its impossible to know however, if it will burst any time soon and if that will affect us.
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Andrew
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Sweetdish
5 Jun 2013, 04:17 PM
Its impossible to know however, if it will burst any time soon and if that will affect us.
I would agree it is impossible to know when it will burst.

But I feel it would be hard to argue that if it does, it won't affect us significantly.
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Oski
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The mentioning of empty cities is not that significant , a empty city of 1.3 million people in China is equivalent to a mining town of 24000 in Australia, likely to affect that town but not Sydney or Melbourne , the same goes for China. 64 million empty new apartments in China by some estimates around 5% of population , not ideal but easily made into social housing. This China we talking about after all whatever it takes to keep the system in equilibrium.
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China home prices soar amid loose credit conditions

PUBLISHED: 0 hour 26 MINUTE AGO

Official data shows prices of newly built Chinese homes rose by as much as 15.5 per cent over the last year, defying government efforts to rein in speculation.

The National Bureau of Statistics said new home prices rose in 65 cities across the country in May from a total of 70 surveyed, as loose credit conditions saw money continue to flood into the sector.

Read more: http://www.afr.com/p/world/china_home_prices_soar_amid_loose_ISEmqDo5e43rlwd05seLQP
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