Looks like another Housing Bubble is about to burst

[ocrenter]

[quote=flu][quote=earlyretirement][quote=ocrenter]https://youtu.be/nGHmk4UeK_w

starting at 10:30, footage of fraudulent loans using fake documentations and inflated sales price reminiscent of our own bubble from 10 years ago.[/quote]

Thanks for sharing ocrenter! That video brought back memories from our own housing mess. There will also be a day of reckoning for China and unfortunately we’ll probably feel it here in the USA as well.

Great seeing you today at lunch. We have to do that more often![/quote]

….And you guys don’t even bother to remember to include some of us… Thanks a lot….. 🙂 J/K….. I’m kinda way out yonder now…..[/quote]

Way out in yonder? Where are you now? I thought you were in RB?

[CA renter]

OCR, very interesting about the different regions having mandates for a particular growth target. Why is the government so hell-bent on forcing unsustainable growth? Where did they think all the people would come from? And how did they think that rural farmers would have the money to pay the kind of prices being demanded for some of these homes? It makes no sense to me.

The stories of the people in that video are heartbreaking. I hope they are able to fight their way through this debacle. For some reason, I had thought that China was working its way out of the most recent slowdown (blogs, articles, etc., were claiming this). Is that still not the case?

[The-Shoveler]

The Gov will buy them by giving the Rural farmers free condos for their land (etc… more than one way to skin a cat).

Happy video’s do not make sensational news.

Sometimes the farmers get two or three condo’s for their whole family.

[FlyerInHi]

[quote=The-Shoveler]The Gov will buy them by giving the Rural farmers free condos for their land (etc… more than one way to skin a cat).

Happy video’s do not make sensational news.

Sometimes the farmers get two or three condo’s for their whole family.[/quote]

That’s about right.

Free condos is how many now middle-class Chinese got their start. As you said, many families got several condos.

Give them free condos and give their kids access to education and a new middle class is born. The economy hums along.

The peasants actually deserve free condos for all their sacrifices and what they endured.

[Coronita]

[quote=ocrenter][quote=flu][quote=earlyretirement][quote=ocrenter]https://youtu.be/nGHmk4UeK_w

starting at 10:30, footage of fraudulent loans using fake documentations and inflated sales price reminiscent of our own bubble from 10 years ago.[/quote]

Thanks for sharing ocrenter! That video brought back memories from our own housing mess. There will also be a day of reckoning for China and unfortunately we’ll probably feel it here in the USA as well.

Great seeing you today at lunch. We have to do that more often![/quote]

….And you guys don’t even bother to remember to include some of us… Thanks a lot….. 🙂 J/K….. I’m kinda way out yonder now…..[/quote]

Way out in yonder? Where are you now? I thought you were in RB?[/quote]

Carlsbad now.

[The-Shoveler]

[quote=flu]

Carlsbad now.[/quote]
Wow, close to my end of town.

Living or just working?

Carlsbad has grownup a lot in the last 10 years, kind of spilling over into the surrounds as well.

[flu]

[quote=The-Shoveler][quote=flu]

Carlsbad now.[/quote]
Wow, close to my end of town.

Living or just working?

Carlsbad has grownup a lot in the last 10 years, kind of spilling over into the surrounds as well.[/quote]

Working, though the thought of getting a second home has crossed my mind.

[ocrenter]

[quote=flu-redux][quote=The-Shoveler][quote=flu]

Carlsbad now.[/quote]
Wow, close to my end of town.

Living or just working?

Carlsbad has grownup a lot in the last 10 years, kind of spilling over into the surrounds as well.[/quote]

Working, though the thought of getting a second home has crossed my mind.[/quote]

well at least you are going against traffic.

gonna be difficult to arrange a lunch get-together then…

[ocrenter]

[quote=CA renter]OCR, very interesting about the different regions having mandates for a particular growth target. Why is the government so hell-bent on forcing unsustainable growth? Where did they think all the people would come from? And how did they think that rural farmers would have the money to pay the kind of prices being demanded for some of these homes? It makes no sense to me. [/quote]

because continued growth gives the government its legitimacy. after all, the people must be willing to allow for the lack of political progress and lack of basic human right, and the reason for that willingness is the trade off of rapid growth.

if you look at countries like S.Korea and Taiwan, political progress and democratization started roughly at the level of economic growth point already achieved by Chinese tier 1 cities such as Shanghai and Beijing and Tianjin. But if you poll citizens of these cities, most will not favor democratization at this time because they still believe staying with an authoritarian government will bring them faster growth.

That belief system will be challenged very quickly when that rapid growth is no longer the reality.

[ocrenter]

[quote=flu]Yes, and you know what’s happening right? All the slightly weaithier ones (including the ones that made an honest business) are quickly trying to move their assets to Europe, the U.S. and Canada. Because when the crapper hits the fan, anyone that is wealth(ier) is a sitting target by the government.[/quote]

very timely WSJ article:

http://www.wsj.com/articles/china-capital-outflows-bubble-below-the-surface-1474357050

[img_assist|nid=26028|title=chinese capital outflow|desc=|link=node|align=left|width=466|height=351]

[FlyerInHi]

The capital outflow is interesting, but once things stabilize, capital will come back

There is a downside for the rich people to leave China. They disconnect themselves with the business environment and their children and grandchildren will have to become ordinary citizens in the west. Status wise, it’s a reduction in cirscumstances.

Remember that in communist countries, free apartments and houses is how the system works. Basically when China changed to a market system, people in shanghai and Beijing got free condos. Those who owned the best locations parlayed that wealth to more riches, education for their kids… more business opportunities.

I have a friend of a friend who worked as an editor in Beijing and lived in union housing back in the day. Residents eventually got their condos for free. Because the land is near Tiennamen square, the apartment was worth a fortune. I stayed there when I visited. Old crappy place…. but as you know the area has all been redeveloped as luxury offices and condos. The rest is history.

China has so much reserves that the residential bad loans are insignificant. The central government can afford to give free condos to another tranche of people.

[an]

[quote=ocrenter][quote=flu-redux][quote=The-Shoveler][quote=flu]

Carlsbad now.[/quote]
Wow, close to my end of town.

Living or just working?

Carlsbad has grownup a lot in the last 10 years, kind of spilling over into the surrounds as well.[/quote]

Working, though the thought of getting a second home has crossed my mind.[/quote]

well at least you are going against traffic.

gonna be difficult to arrange a lunch get-together then…[/quote]There’s always Carmel Valley as a place in the middle.

[The-Shoveler]

[quote=FlyerInHi]
China has so much reserves that the residential bad loans are insignificant. The central government can afford to give free condos to another tranche of people.[/quote]

IMO The game can go on for a very long time yet, no one knows what the end game looks like no matter how much they claim that they do. If the game ends badly it will end badly for everyone (USA included).

It’s in no ones interest to end it.

[dumbrenter]

[quote=spdrun]The world would benefit more through something like Zika spreading and rendering 90% of humans infertile for a generation. Drop the human population down to 500 million inside of a century.

Things stopping and people becoming too concerned about the immediate to want to raise a family would actually be a good thing, not bad.[/quote]

I think this is the start for one of Kurt Vonnegut stories

[FlyerInHi]

[quote=The-Shoveler][quote=FlyerInHi]
China has so much reserves that the residential bad loans are insignificant. The central government can afford to give free condos to another tranche of people.[/quote]

IMO The game can go on for a very long time yet, no one knows what the end game looks like no matter how much they claim that they do. If the game ends badly it will end badly for everyone (USA included).

It’s in no ones interest to end it.[/quote]

Yeah, I agree.

As far as I know, net capital inflow into China is still positive. The chart by OC renter is non-FDI outflow. Plus China has also been investing heavily in buying foreign companies and making foreign investments. How would a family’s investment in a Tea Station be counted?

I’m not saying there won’t be a crisis of some sort, with developers and even local governments in China going bankrupt. But I believe the central government will step in and make some people (builders, speculators, etc..) pay a price, and paper things over. But in the end, those empty developments will be filled with people. As you say, there is still a huge rural population to urbanize for the next couple decades, at least.

I used to think that housing prices in China were crazy based on the median income, even in the first tier coastal cities. But when you take into account that when people got free apartments, hardly pay any property taxes, even on $2,000/mo salary, they can make it work just fine. And with wheeling and dealing, they can make much more.

[Author]

Posts