April 15, 2014

The End Of Crazy China Real Estate

Xinhua reports on Hong Kong. “The government curbs and the U. S. Fed’s tapering have cast a pall on Hong Kong’s housing market, dampening demand and dragging transactions to a 23-year low. Amid the waning demand, some developers started offering new flats at 10 to 20 percent below those in the secondary market. In one example, Sun Hung Kai Properties last month sold flats at its Riva development in Yuen Long at 7,600 to 12,400 HK dollars per square foot, up to 45 percent below list prices when the project was first launched in March last year and also 15 percent below second hand home prices in the area.”

“The secondary market didn’t fare well, neither. ‘In the secondary market, it was a much weaker picture, as falling new flat prices attracted customers to the primary market,’ said Wong Ching-yi, deputy chairwoman of the Midland Holdings. She said that six real estate brokers competed for one deal in 2012. Last year, more than 10 brokers scrambled for one deal. ‘The situation will become even worse this year,’ Wong added.”

CNTV on China. “Chinese mega cities housing turnover has shown a sharp fall in recent months. Some property developers are adopting a variety of new marketing strategies, including offering major discounts to attract home buyers. Some projects in Fangzhuang, Yizhuang and Tongzhou offer an online discount of as much as 50 percent, said Cai Hongyan, president of Real Estate Media Group.”

The Beijing Review. “Despite the housing supply mounting up, homebuyers seem to have gradually lost their enthusiasm and the market has begun to calm down. In Wenzhou of east China’s Zhejiang Province, housing prices have declined for 31 consecutive months, down 31 percent from the highest recorded level. ‘A sharp rise in housing prices always has something to do with speculation,’ noted Qiu Baoxing, Vice Minister of Housing and Urban-Rural Development, saying that what has happened to China now partly resembles the situation in Japan in the 1980s when market participants ranging from large enterprises to vegetable vendors jostled to have a finger in the property pie.”

“‘People tend to believe housing trade is the most lucrative business. As a result, capital and human power keep flocking to the real estate sector, which exerts a crowding-out effect on the real economy,’ said Qiu.”

From Forbes. “Developers in Hangzhou are now offering deep discounts, and investors and owners are noticing. And not just in that city. ‘It seems that the 30% price cut in Hangzhou really changed the way Chinese people think about real estate,’ writes Anne Stevenson-Yang of J Capital Research, ‘and I doubt there is any turning back from here.’”

“‘The banking system and the shadow banking system are becoming concerned about exposure,’ says David Cui of Bank of America. ‘Once people refuse to provide credit to developers, their balance sheets will be under pressure, forcing them to cut prices. Once enough of them cut prices, fewer people would buy because most people buy property only when they think the price is going up.’”

The Global Times. “Since March, 20 property developers in Guangzhou have been offering ‘zero down-­payments’ to attract buyers, in addition to large discounts and tax refund, the National Business Daily reported. New residential building sales volume in Guangzhou fell by 40 percent in the first quarter from a year ago, according to the report. So far this year, a total of six small to medium-sized banks have suspended mortgage loans to customers in Beijing partly due to fear of ­rising default risks, an online loan service provider, told the Global Times.”

Want China Times. “Many banks in cities across China have stopped offering home loans, with 25 out of 35 surveyed cities experiencing the trend, reports the Beijing-based Economic Information Daily. The banks have also adopted harsher scrutiny measures for screening home loan applications, while adjusting their interest rates higher for home loans. Observers have attributed the tightened loan measures to tense capital flows.”

“Meanwhile, figures showed that more than 70% of the cities across China have stopped extending home loans, the paper said. Some banks have replaced home loans with credit loans that demand higher interest rates, while other banks ask clients to purchase their financial products in exchange for an approval for a home loan application, according to finance-focused search platform Rong 360.”

From Reuters. “Suzhou, an ancient city in Jiangsu province 100 km (60 miles) west of Shanghai, became an industrial powerhouse, sitting at the heart of the Yangtze River Delta region that, along with the Pearl River Delta in Guangdong, drove China’s economic boom. Now it is ground zero for a painful corporate de-leveraging that has tacit government approval. One third of all loan delinquencies come from the region, and credit is getting harder to come by.”

“‘The more banks do this, the more they promote a vicious cycle, and companies are even less able or willing to repay their loans,’ said Zhou Dewen, vice chairman of the China Association of Small and Medium Enterprises.”

From NTD TV. “It is apparent that Li Ka-shing and his son are removing all their business from mainland China. In just one year, the Li family sold over 20 billion yuan of property in the mainland. Experts believe that, as Asia’s richest man, Li Ka-shing is very sensitive to China’s economic prospects. His ‘evacuation’ will influence the decisions of the rest of China’s rich. Yang Peichang, economist: ‘The Li family are the most sensitive people. They have low anticipation towards the Chinese economy first of all. Secondly, they are preparing early for possible chaos in China. This is because of the increasingly prominent social disorder in the country.’”

“Recently, real estate in first tier cities such as Beijing, Shanghai, Guangzhou’s have cut prices. The new tactics to draw customers have been displayed, such as beauty model show, hot dancing and free food. Ma Jiesen, economic commentator: ‘It is the end of the crazy China Real Estate. Low prospects are showing up everywhere. The CCP is still trying to pull up the economy by investment. However, it has become less and less efficient. This is because China’s economy is slowing down, and many drawbacks will emerge.’”

Bits Bucket for April 15, 2014

Post off-topic ideas, links, and Craigslist finds here.