China Property Bubble - How true, how far ?

[GoFlyKiteNow]

Below are reports that emerged last week. Maybe these are doom and gloom news.
But could anyone here tell us, what would be the overall implications if there is indeed
a bubble bust in China housing market. Thanks.
----------------------------------------------------

China heading for housing bubble
Updated November 10, 2009 14:06:34

http://www.radioaustralia.net.au/connectasia/stories/200911/s2738289.htm

While India considers withdrawing its stimulus - China is asking the question has its stimulus gone too far?

The Chinese Government's massive stimulus spending this past year has helped fuel a property boom -- that some China watchers fear is fast turning into a bubble at risk of bursting.

Property sales in China have surged 85 per cent over the past year and prices of new apartments in Shanghai have risen by nearly 30 per cent alone.

Arthur Kroeber is head of Dragonomics -- a highly regarded independent economics research firm based in Beijing. He says managing the house price bubble will be one of the key challenges facing the Chinese Government in the coming year as economic growth continues to strengthen.
-----------
http://www.chinadaily.com.cn/china/2009-11/04/content_8911064_2.htm
Blowing up a property bubble in China
By Andrew Moody, Zhang Qi and Xin Zhiming (China Daily)
Updated: 2009-11-04 10:10
------------

http://www.propertyguru.com.sg/news/2009/11/26711/asian-property-markets-fear-a-real-estate-bubble

Asian property markets fear a real estate bubble

In China, average prices have increased by 37 percent from the previous year. The recent analysis from Credit Suisse shows that almost all major cities in China have experienced property price increases from 26 to 96 percent in their new home sales within 12 months.

The China Banking Regulatory Commission wants to cut leverage at large state-owned companies that have entered the market and developers that have purchased lands at extravagant prices. There are claims that a number of developers borrowed a lot of money. Experts believe this can threaten to cause an increase in delinquent debts if property prices begin to collapse.

The Singapore government has already taken measures, including shutting down bank lending programmes that permitted home buyers to delay their payments on developments that are yet to be completed.

 

[Watchman]

Everything is going to be a bubble in China soon .

From their stock markets to US debts that they are buying on credit .

 

[saratogas]

So the new IPO Captial Mall Asia can buy or not? Bidding price $2.12 each.

 

[longbow]

1) Reason why India is talking about withdrawing its stimulus is because the Indian Gov cannot afford it. They are running budget deficits

"India may consider rolling back fiscal stimulus early in the year starting April 1, Montek Singh Ahluwalia, deputy chairman of the Planning Commission, said in New Delhi yesterday. This would help reduce a budget deficit estimated to reach a 16- year high of 6.8 percent of gross domestic product this year. "

http://www.bloomberg.com/apps/news?pid=20601102&sid=aPmtfYMoPTHA

2) There is an asset bubble in China and the officials are very concerned about it. But that is the problem with fiscal stimulus. There is now talk about an increase in property tax to let some air out of the bubble. Only thing positive is that the Chinese G still has lots of money to mitigate any busting of this property bubble.

Below are reports that emerged last week. Maybe these are doom and gloom news.
But could anyone here tell us, what would be the overall implications if there is indeed
a bubble bust in China housing market. Thanks.
----------------------------------------------------

China heading for housing bubble
Updated November 10, 2009 14:06:34

http://www.radioaustralia.net.au/connectasia/stories/200911/s2738289.htm

While India considers withdrawing its stimulus - China is asking the question has its stimulus gone too far?

The Chinese Government's massive stimulus spending this past year has helped fuel a property boom -- that some China watchers fear is fast turning into a bubble at risk of bursting.

Property sales in China have surged 85 per cent over the past year and prices of new apartments in Shanghai have risen by nearly 30 per cent alone.

Arthur Kroeber is head of Dragonomics -- a highly regarded independent economics research firm based in Beijing. He says managing the house price bubble will be one of the key challenges facing the Chinese Government in the coming year as economic growth continues to strengthen.
-----------
http://www.chinadaily.com.cn/china/2009-11/04/content_8911064_2.htm
Blowing up a property bubble in China
By Andrew Moody, Zhang Qi and Xin Zhiming (China Daily)
Updated: 2009-11-04 10:10
------------

http://www.propertyguru.com.sg/news/2009/11/26711/asian-property-markets-fear-a-real-estate-bubble

Asian property markets fear a real estate bubble

In China, average prices have increased by 37 percent from the previous year. The recent analysis from Credit Suisse shows that almost all major cities in China have experienced property price increases from 26 to 96 percent in their new home sales within 12 months.

The China Banking Regulatory Commission wants to cut leverage at large state-owned companies that have entered the market and developers that have purchased lands at extravagant prices. There are claims that a number of developers borrowed a lot of money. Experts believe this can threaten to cause an increase in delinquent debts if property prices begin to collapse.

The Singapore government has already taken measures, including shutting down bank lending programmes that permitted home buyers to delay their payments on developments that are yet to be completed.

 

[GoFlyKiteNow]

" 2) There is an asset bubble in China and the officials are very concerned about it. But that is the problem with fiscal stimulus. There is now talk about an increase in property tax to let some air out of the bubble. Only thing positive is that the Chinese G still has lots of money to mitigate any busting of this property bubble. "

----
Focusing on the main point in the thread..and on the sole question raised..
which is IF a bust occurs.

Could you tell us:
What do be the impact..on us here..in terms of stock market, share prices property market and any other issues that could affect folks here.

Thanks

 

[longbow]

I think the main thrust in your question was that gov stimulus both in China and India has created an asset bubble. And whether this stimulus should be withdrawn - you highlighted India's withdrawal.

My answer was that India has to withdraw it stimulus because of budget concerns. The country debt rating is poor and the budget deficit is no help. I do not think that stimulus should be withdraw as the world economy is still weak. However unlike the "dangerous times" of 9 months ago, where the global financial system was on verge of collapse, global economy has stabalized. There is a definite possibilty of a double dip so stimulus must remain. However they should be fine tuned to reduce asset bubbles.

Here is take of Chinese central bank and the part about increase property taxes to mitigate speculation on property.

http://www.chinapost.com.tw/business/asia/b-china/2009/11/19/233397/China-faces.htm

China faces asset-bubble risk: PBOC's Fan
China is among the emerging markets facing risks of property and commodity market bubbles, central bank adviser Fan Gang said, joining officials from the region in expressing concern about surging asset prices.
A “double-digit” economic growth rate wouldn't be good for China, Fan, who heads the National Institute of Economic Research, said at a business conference in Hong Kong Wednesday. Chinese gross domestic product may be able to climb 8 percent to 9 percent next year, he also said.

Fan is the latest voice to indicate the seeds of the next financial crisis may be being laid in Asia in the wake of liquidity injections by the world's central banks. China's government has encouraged a US$1.3 trillion credit boom this year, helping growth accelerate while at the same time aiding an 81 percent climb in the Shanghai Composite Index of stocks.

Emerging economies “might overheat and experience financial turmoil,” Bank of Japan Governor Masaaki Shirakawa said in Tokyo Nov. 16. Liu Mingkang, China's top banking regulator, said the day before that low U.S. interest rates and the dollar's depreciation present “new, real and insurmountable risks to the recovery of the global economy.”

World Bank President Robert Zoellick said last week in a Bloomberg Television interview that “given the pace of recovery in East Asia, you could start to see some asset bubbles.” He added that there will “be a need” to consider raising interest rates and taking other steps to restrain credit.

China's economy grew 8.9 percent in the third quarter from a year earlier, the fastest pace in a year, as stimulus spending and record lending growth helped the nation lead the world out of recession. The median projection of economists surveyed by Bloomberg News is for GDP to jump more than 10 percent in the final three months of 2009.

Fan, the academic member of the People's Bank of China's monetary policy committee, told property developers at a business conference in Hong Kong Wednesday that while the Chinese property market isn't “crazy,” there is excessive speculation.

High savings are fueling that speculation, Fan said, urging consideration of taxes on luxury properties. Levies are important to balance demand, he said.

China's southern city of Shenzhen is “a pioneer” by introducing a property tax, Fan said.

Consumer-price inflation isn't likely in coming months, with stable food prices providing a restraint, Fan also said.

Fan said that China must continue its stimulus measures in 2010 to sustain growth, even as he rejected the prospect of a double-dip slowdown in the expansion. The U.S. may see a renewed slump, he also said.

China should maintain a “moderately loose” monetary policy next year as government stimulus wanes and private investment and external demand remain weak, the State Information Center said Nov. 16.

The world's third-largest economy has countered a 12-month slide in exports by rolling out a four trillion yuan (US$586 billion) stimulus package. Much of it is focused on investment, including the building of roads, airports and railways.

" 2) There is an asset bubble in China and the officials are very concerned about it. But that is the problem with fiscal stimulus. There is now talk about an increase in property tax to let some air out of the bubble. Only thing positive is that the Chinese G still has lots of money to mitigate any busting of this property bubble. "

----
Focusing on the main point in the thread..and on the sole question raised..
which is IF a bust occurs.

Could you tell us:
What do be the impact..on us here..in terms of stock market, share prices property market and any other issues that could affect folks here.

Thanks

 

[hellfire]

buy Chinese property at your own peril!

 

[GoFlyKiteNow]

I think the main thrust in your question was that gov stimulus both in China and India has created an asset bubble. And whether this stimulus should be withdrawn - you highlighted India's withdrawal..

---
I am still in the dark..what would be the impact on rest of us here..
( Ignore India and Singapore..as mentioned in passing, in the news articles. )
Thx

 

[allanlee]

In 2002 I bought a condo in China for RMB 280,000......... it is now worth RMB 2,100,000 :p ........ but to sell it is so troublesome as everybody wants a cut of the profit. :(

 

[longbow]

If you read my post, my feel is that although the financial system meltdown is over, there is still lack of demand and so stimulus is still needed to help the economy along.

How it will affect us. Best way is to watch the big guys. If China has a double dip then the neighboring countries will be affected. China will be forced to reduce consumption (recession) and the resource producing nations like Middle East oil producers, Australia, Indonesia and Malaysia will be affected. In a way the huge Chinese stimulus has helped many of these resource exporting nations.

Yes all this stimulus has created an asset bubble but that is the price for prevent a global depression. Given that the worst is over Governments can now turn to their asset bubble problem.

I think the main thrust in your question was that gov stimulus both in China and India has created an asset bubble. And whether this stimulus should be withdrawn - you highlighted India's withdrawal..

---
I am still in the dark..what would be the impact on rest of us here..
( Ignore India and Singapore..as mentioned in passing, in the news articles. )
Thx

 

[singveld]

china is doom. it is at the edge of the abyss.
the only way to get out of it, is to start a war.
north russia, east is japan, south is north korea, vietnam
take a pick

Below are reports that emerged last week. Maybe these are doom and gloom news.
But could anyone here tell us, what would be the overall implications if there is indeed
a bubble bust in China housing market. Thanks.
----------------------------------------------------

China heading for housing bubble
Updated November 10, 2009 14:06:34

http://www.radioaustralia.net.au/connectasia/stories/200911/s2738289.htm

While India considers withdrawing its stimulus - China is asking the question has its stimulus gone too far?

The Chinese Government's massive stimulus spending this past year has helped fuel a property boom -- that some China watchers fear is fast turning into a bubble at risk of bursting.

Property sales in China have surged 85 per cent over the past year and prices of new apartments in Shanghai have risen by nearly 30 per cent alone.

Arthur Kroeber is head of Dragonomics -- a highly regarded independent economics research firm based in Beijing. He says managing the house price bubble will be one of the key challenges facing the Chinese Government in the coming year as economic growth continues to strengthen.
-----------
http://www.chinadaily.com.cn/china/2009-11/04/content_8911064_2.htm
Blowing up a property bubble in China
By Andrew Moody, Zhang Qi and Xin Zhiming (China Daily)
Updated: 2009-11-04 10:10
------------

http://www.propertyguru.com.sg/news/2009/11/26711/asian-property-markets-fear-a-real-estate-bubble

Asian property markets fear a real estate bubble

In China, average prices have increased by 37 percent from the previous year. The recent analysis from Credit Suisse shows that almost all major cities in China have experienced property price increases from 26 to 96 percent in their new home sales within 12 months.

The China Banking Regulatory Commission wants to cut leverage at large state-owned companies that have entered the market and developers that have purchased lands at extravagant prices. There are claims that a number of developers borrowed a lot of money. Experts believe this can threaten to cause an increase in delinquent debts if property prices begin to collapse.

The Singapore government has already taken measures, including shutting down bank lending programmes that permitted home buyers to delay their payments on developments that are yet to be completed.

 

[zuoom]

If you read my post, my feel is that although the financial system meltdown is over, there is still lack of demand and so stimulus is still needed to help the economy along.

How it will affect us. Best way is to watch the big guys. If China has a double dip then the neighboring countries will be affected. China will be forced to reduce consumption (recession) and the resource producing nations like Middle East oil producers, Australia, Indonesia and Malaysia will be affected. In a way the huge Chinese stimulus has helped many of these resource exporting nations.

Yes all this stimulus has created an asset bubble but that is the price for prevent a global depression. Given that the worst is over Governments can now turn to their asset bubble problem.

as you mentioned earlier, the China G has lots of $. they would and can spend their way out of basically anything. *similar idea borrowed from the Japs n US.

question now is whether the Chinese locals would bite n buy those items. be it inflated properties, or extra new items like the newest TV, fridges, cars, aircon, watches, phones etc.

was once told by a local. you think this is big? (he referring to his stockpile of products. and to the number of apartments on the streets.) China is very big, alot of people. he added "my goods will be sold within this month." and "the apartments are all already sold. prices are quite ok, around 4000rmb per square meter."

quick math, one unit around 80sqm. approx 320000rmb. using his a average wage of 3000rmb a month, it's around 9 times the value. which is just about ok. as long as it's under 10x ratio. it should be relative safe.

the few issue i had with it, was that some of the asking had gone up double in a span of 2 years. true, some of the guys/ladies had it well. their wages had in far more than double in the same span. but that's not applied thru out.

another issue is the rather speculative demand of many items. ie: copper, steel etc.
in oil there's the "round tripping" incident.
in copper, there's the trader that once bought up more than the actual supply of copper and then recently, pig farmers getting together to buy n stock copper.
similar situation with steel, people stop their usage work, buy/rent warehouses to stock steel. idea is to buy low (using bank money), and then sell high (using that to repaid off the loan n principal sum.).

 

[GoFlyKiteNow]

If you read my post, my feel is that although the financial system meltdown is over, there is still lack of demand and so stimulus is still needed to help the economy along.

How it will affect us. Best way is to watch the big guys. If China has a double dip then the neighboring countries will be affected. China will be forced to reduce consumption (recession) and the resource producing nations like Middle East oil producers, Australia, Indonesia and Malaysia will be affected. In a way the huge Chinese stimulus has helped many of these resource exporting nations.

Yes all this stimulus has created an asset bubble but that is the price for prevent a global depression. Given that the worst is over Governments can now turn to their asset bubble problem.

So you would suggest ( as a just in case strategy ) - diversify the stock portfolio..don't put too much into property related stocks..
What about bank stocks..?
Thx

 

[GoFlyKiteNow]

Longbow..here is a news article dateline yesterday.

http://www.bloomberg.com/apps/news?pid=20601068&sid=awonLXtlhUzE

China Faces Asset-Bubble Risk, PBOC Adviser Fan Says (Update2)
By Sophie Leung and Chia-Peck Won

Nov. 18 (Bloomberg) -- China is among the emerging markets facing risks of property and commodity market bubbles, central bank adviser Fan Gang said, joining officials from the region in expressing concern about surging asset prices.

“The real risk is really asset bubbles,” Fan, who heads the National Institute of Economic Research, said at a business conference in Hong Kong today. A “Chinese asset bubble would be something very dangerous, that would cause the overheating” elsewhere as well, he said.

Low interest rates sustained by the Federal Reserve, a weakening dollar and capital inflows to emerging markets have added to the dangers, Fan said. He becomes the latest voice indicating that the seeds of the next financial crisis may be being laid in Asia in the wake of liquidity injections by the world’s central banks.

“When there is too much money around looking for good opportunities and emerging markets are the only places where growth is happening, over liquidity will lead to asset bubbles in equities, real estate and commodities,” Fan said. “That’s something we really need to watch.” ...

 

[longbow]

That is pretty much the same article that I posted. It was reporting on the same meeting by the same PBOC official.

Chinese officials seem very pragmatic

Here it is posted in its entirety:

By Sophie Leung and Chia-Peck Wong

Nov. 18 (Bloomberg) -- China is among the emerging markets facing risks of property and commodity market bubbles, central bank adviser Fan Gang said, joining officials from the region in expressing concern about surging asset prices.

“The real risk is really asset bubbles,” Fan, who heads the National Institute of Economic Research, said at a business conference in Hong Kong today. A “Chinese asset bubble would be something very dangerous, that would cause the overheating” elsewhere as well, he said.

Low interest rates sustained by the Federal Reserve, a weakening dollar and capital inflows to emerging markets have added to the dangers, Fan said. He becomes the latest voice indicating that the seeds of the next financial crisis may be being laid in Asia in the wake of liquidity injections by the world’s central banks.

“When there is too much money around looking for good opportunities and emerging markets are the only places where growth is happening, over liquidity will lead to asset bubbles in equities, real estate and commodities,” Fan said. “That’s something we really need to watch.”

Emerging economies “might overheat and experience financial turmoil,” Bank of Japan Governor Masaaki Shirakawa said in Tokyo Nov. 16. Liu Mingkang, China’s top banking regulator, said the day before that low U.S. interest rates and the dollar’s depreciation present “new, real and insurmountable risks to the recovery of the global economy.”

Speed Limit

A “double-digit” economic growth rate wouldn’t be good for China, Fan, the academic member of the People’s Bank of China’s monetary policy committee, told property developers at the Hong Kong conference. Gross domestic product may be able to climb 8 percent to 9 percent next year, he also said.

China’s government has encouraged a $1.3 trillion credit boom this year, helping growth accelerate while at the same time aiding an 81 percent climb in the Shanghai Composite Index of stocks.

China’s economy grew 8.9 percent in the third quarter from a year earlier, the fastest pace in a year, as stimulus spending and record lending growth helped the nation lead the world out of recession. The median projection of economists surveyed by Bloomberg News is for GDP to jump more than 10 percent in the final three months of 2009.

Property Speculation

Fan said that while the Chinese property market isn’t “crazy,” there is excessive speculation. High savings are fueling that speculation, Fan said, urging consideration of taxes on luxury properties. Levies are important to balance demand, he said.

China’s southern city of Shenzhen is “a pioneer” by introducing a property tax, Fan said. The average sale price of Shenzhen homes exceeded 20,000 yuan ($2,930) a square meter in September, a record high, Huang Yu, executive vice rector at China Index Academy, said at the same conference today.

In Beijing, the price was about 14,700 yuan a square meter, she said. The academy compiles real estate data, including the China Real Estate Index System.

“In the next 10 years, there will be demand for 1.2 billion to 1.4 billion square meters of homes a year,” she said. The total area of homes sold this year may reach 900 million square meters, from 600 million square meters in 2008.

Prices Accelerate

Home prices in 70 major Chinese cities climbed 3.9 percent from a year earlier in October, the most in 14 months, the government reported Nov. 10.

Consumer-price inflation isn’t likely in coming months, with stable food prices providing a restraint, Fan also said.

In contrast to the warnings of asset bubbles, Industrial & Commercial Bank of China Ltd. Chairman Jiang Jianqing said last week that this year’s record lending won’t lead to an increase in bad debts in 2010.

“It is true that prices have been picking up in both the property market and the capital markets in China,” Jiang, who heads the world’s most profitable bank, told reporters in Singapore Nov. 13. “Because we are just moving out of the very deep global economic recession,” the pick-up in prices “cannot be defined as a bubble building” as yet, he said.

Fan today said that China must continue its stimulus measures in 2010 to sustain growth, even as he rejected the prospect of a double-dip slowdown in the expansion. The U.S. may see a renewed slump, he also said.

China should maintain a “moderately loose” monetary policy next year as government stimulus wanes and private investment and external demand remain weak, the State Information Center said Nov. 16.

World Bank President Robert Zoellick said last week in a Bloomberg Television interview that “given the pace of recovery in East Asia, you could start to see some asset bubbles.” He added that there will “be a need” to consider raising interest rates and taking other steps to restrain credit.