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buffalonate (94.59)

Chinese Real Estate Bubble Finally Crashes

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December 07, 2011 – Comments (7)

I have been reading about the Chinese real estate bubble for at least a year now.  Time Magazine has had a couple of articles showing completely empty newly constructed cities.  They also explained how investing in real estate had become the national past time.  People invested all of their money in new real estate investments and it appears crap has finally hit the fan.  All of their money is tied up in apartments that they can't sell.  For 3 months in a row real estate prices have fallen.  They are now down more than 20% in the last 3 months.  Real estate prices had tripled in the last few years so it was just a matter of time before the bubble deflated.  Here is a video from Reuters explaining the problem.  http://www.reuters.com/video/2011/12/02/chinas-real-estate-ghost-towns?videoId=226140847  The Chinese govt's answer to every problem is to build more stuff so it should be interesting to see how they respond to this crisis.

7 Comments – Post Your Own

#1) On December 07, 2011 at 6:49 PM, dinodelaurentis (74.85) wrote:

Am I completely off base by seeing a William Gibson "Neuromancer" future in these empty buildings??!!

Brand new construction unoccupied by paying owners becoming a squatters paradise fueled by a 21st century information technologies in an economically and enviromentaly devastated landscape?

In China?

It just seems so weird but it jumps out at me.

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#2) On December 07, 2011 at 7:31 PM, jwebbzor (< 20) wrote:

dino, thanks... Now I've just added another book to my want to read list... It's now 127 titles long.

The U.S. subprime crisis never got that out of hand.. I'd have to wager a hard landing for the chinese economy. What is the best way to play the bet of a continued decline in chinese real estate prices?

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#3) On December 07, 2011 at 8:08 PM, Berzerker (< 20) wrote:

Back in July of this year, I saw a video segment produced by an Australian news show about this, which is still available:

 

http://www.youtube.com/watch?v=rPILhiTJv7E

 

 This seems like such an explosive story, I wondered why it wasn't being covered by every major news outlet. We are all terrified by the implications of China's rapid growth, and yet they are artificially padding GDP by building cities, with housing, infrastructure and commercial space that are almost completely unoccupied. That strategy seems, in my opinion, to be extremely devious and unsustainable.

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#4) On December 07, 2011 at 8:34 PM, buffalonate (94.59) wrote:

I read a couple of stories today about how the factory workers are starting to strike in China in large numbers. The number of strikes there is going through the roof. Their wages are not keeping up with inflation so they feel they have nothing to lose by striking. 

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#5) On December 08, 2011 at 9:36 AM, GNUBEE (25.11) wrote:

Buffalonate,

With more workers "not working" in China, expect to see more strikes/discord. "Borrowing" money from the Chinese was great, since I was only a subsidy to keep the people busy..er "working"

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#6) On December 08, 2011 at 1:07 PM, IBDvalueinvestin (99.67) wrote:

The problem is not just the Real Estate Crash in China.

The impact of this crash will send waves thru all of China's sectors , much the same way it did to the USA sectors when the US real estate crashed.

Overnight people lost 30 to 50% of paper wealth and stopped spending to a halt which caused other sectors to crash as well. 

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#7) On December 08, 2011 at 1:31 PM, buffalonate (94.59) wrote:

The weird thing about China is they don't really have mortgage loans.  They had to put 30% down and pay off the rest in under 3 years. There were loans but they were mostly through family or friends.  I believe it will get really ugly in China over the next few years.  It will be fun to watch. 

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