Some Think This Is Madness
A report from China Daily. “How much should two chicken pancakes cost? For Zhao Rui, a 28-year-old company executive in Beijing, they cost him 400,000 yuan when he missed the chance to buy a home at a lower price during his lunchtime. In early March, Zhao settled on a two-bedroom apartment in Beijing’s Tongzhou district. Except for the 18,000 yuan per square meter price, he was quite satisfied with it. So, before finally handing over the cash, Zhao and his girlfriend decided to have lunch. But when they returned to the sales office and were ready to pay, they were told that the apartments had sold out and they would have to wait another three weeks for the next building to become available.”
“A couple of weeks later, Zhao, fearing he could never afford such a home if he continued to hesitate, paid 400,000 yuan more for a similar sized apartment in the same community. Quite a number of projects in Beijing and Shanghai were sold out on their first day of trading. In Hangzhou, more than 4,000 people struggled for 224 apartments with an average price of 18,000 yuan per sq m last weekend, creating chaos and forcing the developer to call the police.”
“According to a report from the central bank, investment-oriented home purchases accounted for 23.1 percent in the first quarter of this year, reaching a record high in the past two years. The report also shows 14.2 percent of residents have more than one apartment. ‘With a spare 400,000 to 500,000 yuan at hand, could you find a better investment channel than buying properties?’ said Li Yan, a businessman working in Wenzhou and Beijing.”
“For people on average incomes in Beijing and Shanghai, a regular two-bedroom apartment may cost them 20 to 30 years’ income, far higher than the international average of six years. In a healthy market, landlords can reach the break-even point after receiving rents for 16 to 25 years. But in Beijing and Shanghai, they need 36 to 42 years to get the cost back, according to China Index Academy, a real estate research institute. ‘Buying an apartment, or more accurately, snagging a home at the moment, is no different from putting a time bomb beside you,’said Wang Liang, a college teacher who gives up his previous plan to buy a home in Beijing.”
From the China Post. “China’s central bank pledged to immediately implement new lending rules to cool real-estate speculation. China’s Cabinet, the State Council, announced higher mortgage rates and down-payment ratios for second homes on April 15 after property prices jumped by a record in March.”
“Investors ‘don’t realize how strong and resolute the political will is among top leaders to curb price gains,’ said Li Daokui, a newly appointed academic adviser to the monetary policy committee, on Central Television. The market is having its ‘last madness’ and speculation may dissipate in a year or 18 months on extra action by local authorities and an increased supply of low-price, so-called policy homes, Li said.”
“Under the new rules, down payments for second homes must be at least 50 percent, up from 40 percent, and mortgage rates can’t be lower than 110 percent of benchmark rates, the State Council said. Banks should also raise down payment ratios and rates for third homes ‘by a broad margin,’ it said.”
From CCTV. “The new regulations have astonished industry insiders, who say they will greatly help to curb surging house prices in China. ‘I think it’s an unprecedented move. It focuses on speculation, which is the key point, and the major reason behind surging prices. The move to postpone loans for a third apartment is to curb speculation.’ Ma Guangyuan, a Ph.D in economy, remarked.”
From Bloomberg. “‘These are the most draconian measures on the property market in history,’ Jun Ma, Deutsche Bank AG’s Greater China chief economist, said in a note to clients. Chinese press reports point to ‘panic selling’ by investors who own more than one home in Shanghai, Beijing and Shenzhen, he said.”
“Investors should ‘avoid the property, banking, steel and construction material industries,’ Morgan Stanley Asia Ltd.’s analysts Jerry Lou and Allen Gui wrote in a research note dated today. ‘The harsh tone in Saturday’s statement suggests that containing property price is now the top item on Beijing’s agenda.’”
“The country is ‘on a treadmill to hell,’ according to hedge fund manager James Chanos, who said in January the nation is Dubai times a thousand. ‘They can’t afford to get off this heroin of property development. It is the only thing keeping the economic growth numbers growing.’”
From The Age in Australia. “Georgina and Ronald Rae bought their first home in 1955 for $6900. It was a three-bedroom weatherboard on a dirt road in Box Hill North, with a septic tank on the back porch. It took them six years to save the $1510 deposit. They raised the rest with a serviceman’s loan. The Raes, who went on to have eight children, took 37 years to pay off their mortgage - starting out with monthly repayments of $20.72.”
“In December last year, their grandson, Joel Anderson, 31, bought his first home, a unit in Richmond, for $436,000. He has borrowed 95 per cent of the total from the bank ($414,200) and is receiving another $40,000 from his parents to pay for the renovations. His monthly repayments will be about $2425. ‘I think houses have become way too expensive. It’s way out of proportion, isn’t it?’ says Mrs Rae. ‘It’s crazy.”’
“Joel Anderson’s experience is typical of many young homebuyers. He tried to buy seriously for about a year: looking on the internet for an hour or more every night, going to inspections, getting outbid at auctions, and finally enlisting the help of buyer advocate Frank Valentic. House shopping was a ‘nightmare’, says the sales manager, who works in the family spa business and earns $60,000 a year. The market was ‘out of control.’”
“Eventually, he settled on a run-down unit in Richmond. More than 60 per cent of his weekly income now goes towards mortgage payments. His girlfriend will help meet the payments when they move in.”
“In 1955, the Raes’ house cost about twice Mr Rae’s annual income as a milkman. At that time people were typically able to afford a decent house on a single income, says Terry Burke, professor of housing studies at Swinburne University. These days, a family like the Raes with one income and eight children would struggle to buy a house anywhere in Victoria, he says.”
“Joel Anderson, who earns a typical salary and bought for less than the Melbourne median price of $524,500, paid more than seven times his yearly income for the unit. As house ownership slips further and further from reach, debt is ballooning. ”People are being seduced into a lifestyle built around debt,’ Professor Burke says. ‘Some of us would think that is madness, and the Americans have illustrated that.”’
“At some point soon, he warns, the difference between income and house prices will become untenable. ‘We must be close,’ he says.”
The Sydney Morning Herald in Australia. “With house prices across the nation showing double-digit gains over the past year it may not be a coincidence that Channel Nine is now reviving The Block, its 2003 property show that epitomised Australia’s exuberance for bricks and mortar during the previous boom. The seeds for the show’s revival may have been sown late last year when one of the Bondi units sold off as part of the previous show’s grand finale recouped its purchase price.”
“It took six years, but nobody is looking in the rearview mirror now. Australians have decided the global financial crisis was ’so last decade,’ and the property market is providing a barometer of just how much people are prepared to punt on good times ahead. Investment property loans rose 22 per cent to a record $289 billion in the 12 months to January. On the weekend before Easter, NSW had the second-biggest house auction day in its history.”
“The Reserve Bank governor, Glenn Stevens, took the unusual step last month of appearing on breakfast television to caution against speculating on property. ‘I think it is a mistake to assume that a riskless, easy, guaranteed way to prosperity is just to be leveraged up into property. You know it isn’t going to be that easy,’ he told Seven’s Sunrise program.”
“Mortgage refinancing accounted for more than one in three new mortgages last month, with a growing number of these borrowers effectively using the family home as an ATM once again. The money was being withdrawn against mortgages to acquire shares, ride the strong Australian dollar to an overseas holiday destination, or trade in the family car, with car sales hitting a record high that month. Five of the 10 brands that recorded the biggest sales growth in the first three months of this year were Lamborghini, Ferrari, Porsche, Audi and Jaguar.”
From Your Home in Canada. “Jimmy Millis and his fiancée Nicoletta Bisoukis spent more than a year looking for their first home. During that time, the couple visited dozens of properties in a journey that many potential buyers in the Greater Toronto Area can relate to. The first property they bid on last summer in Woodbridge was a four bedroom for $480,000. It ended up selling for $504,000. The pattern would repeat itself six more times — with the couple on the losing end of the bid. But while the journey was ultimately worth it — they did finally land their dream home in King City.”
“From one of the slowest markets in history at the beginning of last year, the pendulum has swung resoundingly back to a seller’s market. ‘We thought we would be buying in one of the best buyer’s markets and we ended up being thrown into these crazy bidding wars,’ says Bisoukis.”
“‘The sudden rally in Canada’s residential real estate market is surprising and troubling,’ says Desjardins Bank in a recent economic study. ‘However, this is not a bubble yet.’”
“‘We kept thinking prices would come down, but it kept going up and, finally, we had to jump in with both feet. We were getting married this year and we had to get along with our lives,’ says Millis.”
“On their seventh try, Millis says he got lucky. They bid more than half a million dollars on the property, beating out two other bidders. Bisoukis was actually in New York when Millis made the bid. ‘He said we would lose it if we didn’t bid right away,’ she recalls. Returning from New York later in the week she had ‘about 20 minutes’ after seeing the home for the first time to up their offer. Their new home is a 1,900-square-foot, 40-year-old renovated bungalow that they moved into last month.”
“‘It’s not a palace. But it’s our palace,’ says Millis.”
From CBC News in Canada. “Vancouver teacher Petr Pospisil and his girlfriend, Ola Rogula, put together ‘Crack Shack or Mansion,’ where players look at photos of a run-down house and guess whether it’s a hot property or a drug den. Pospisil got the idea after watching the average price of a single-detached house in Metro Vancouver creep toward $1 million, then looking at home listings online to see what that money buys.”
“‘If you didn’t know they were in Vancouver, you could think they were in Detroit or Chicago,’ he said. ‘They were run-down places….I was studying the States a lot and what happened with their real estate market. Just watching what was happening in Vancouver was a little bit scary.’”
“‘I thought about taking the heat off Vancouver a little bit and showing some of the other bubble areas in the world, like Australia,’ Pospisil said. ‘But I did a bit of searching and really found that Vancouver’s the most extreme example. A million dollars even in Australia will buy you a pretty nice place.’”
The Canadian Press. “Real estate agent Marcus Caporicci calls it ‘creative’ financing and expects to see more of it when tighter qualifying rules for mortgages take effect on Monday. The new rules are to discourage homeowners from taking out mortgages they might not be able to afford as interest rates start to rise and return to more normal levels. ‘Creative financing will become increasingly popular,’ Caporicci said from London, Ont.”
“Federal Finance Minister Jim Flaherty announced the new mortgage rules in February amid warnings that some homebuyers were taking on too much mortgage debt as house prices soared across the country and could be in trouble if rates rose. ‘There is no evidence of a housing bubble, but we’re taking prudent steps today to prevent one,’ he told a news conference in Otttawa at the time.”
“Under the new rules, the federal government will: -Require all homeowners meet the borrowing standards for a five-year fixed-rate loan even if they choose variable or shorter-term loans. -Lower the maximum Canadians can withdraw when refinancing their mortgages to 90 per cent from 95 per cent of the value of their home. -Require a minimum 20 per cent down payment to qualify for CHHC insurance for non-owner-occupied properties acquired as an investment - a move aimed at cooling real estate speculation.”
“Flaherty did not change the rules affecting the five per cent minimum down payment or the 35-year maximum amortization period for a mortgage. Almost all of Caporicci’s clients - he estimates 90 to 95 per cent -have been putting down the minimum five per cent down payment, often with the help of either their families or their own credit lines. ‘It’s hard enough for people to get their hands on five per cent down,’ he said, noting home buyers will continue with their creativity to get the money they need to enter the housing market.”
“Homebuyers also have been basing their decisions on a ‘buy now’ strategy to avoid the coming changes, Caporicci said.”
“Peter Kinch, a mortgage and housing expert, agreed that the new mortgage rules effect only a minority of buyers in each case. As a result, he expects the incoming rules will have minimal effect on Canadian housing prices. ‘In the big picture, it will impact those who are in the fringe and those who potentially could have gotten into trouble, but, at the end of the day, it’s not going to have a huge impact of cooling off housing prices,’ he told CTV News Channel on Monday morning. ‘I don’t think we’re going to see a major impact on housing prices at all.’”
The Global Post on Costa Rica. “A new crop of high-end shops is sprouting up in a leafy San Jose suburb, signaling a new trend in luxury shopping here, and raising brows about the habits of Costa Rica’s emerging ‘nouveau riche. Jewels by Tiffany, threads by Armani and shoes by Ferragamo are among the posh apparel that will adorn store windows. Granted, many of the Multiplaza’s prospective customers are foreigners.”
“Never before have riches in Costa Rica been so concentrated. The State of the Nation found that from the mid-1980s to the present Costa Rica’s wealthiest segment has nearly doubled its wealth, while other sectors have risen much more moderately. (Last year’s poverty rate went up one percentage point to 18.5 percent.)”
“In the eastern San Jose district of Curridabat, Jose Francisco Oreamuno makes heads turn as he pulls his silver Porsche Carrera into a Jose parking lot. He’s the president of the Porsche Club Costa Rica, a group that has about 40 members, more than half of them Costa Rican. Oreamuno estimates there are at least 75 Porsche owners throughout the country. ‘Now you find high-income segments of the population with cars that are very ostentatious, with homes that are huge and generally consume status products and wear certain brands that convey social status,’ said Miguel Gutierrez, director of nongovernmental research group State of the Nation.”
The Tico Times in Costa Rica. “In the last 16 years, Atlanta businessman Charles Brewer has created the Internet service provider MindSpring, founded a real estate development company, and developed a 28-acre residential, office and retail community in Atlanta known as Glenwood Park, which was his first excursion into the ‘new urbanism’ he is bringing to Costa Rica’s Pacific coast. But now Brewer has bigger aspirations: He wants to build a town.”
“Brewer, with contributions from a few other investors, purchased a 1,200-acre plot of land north of Flamingo Beach in northwestern Guanacaste known as Las Catalinas on the shores of Playa Danta and Playa Dantita. A few months ago, construction began on the first homes in Las Catalinas. Within the next year, seven homes and a restaurant, Lola’s del Norte, are expected to be completed. And over the course of the next several years, Brewer, Davey and a group of 25 other investors hope to construct a central road, a church, restaurants, several small hotels and around 2,000 homes.”
“Gadi Amit, president of the Sardinal-based environmental group Confraternidad Guanacasteca, expressed concerns that the idea behind Las Catalinas was ‘not ambitious, but unrealistic.’ Amit said that Sugar Beach, just south of the Las Catalinas land, is crippled by an erratic and insufficient water supply.”
“‘There is nothing on those beaches and there is nothing around it,’ Amit said. ‘It will be very difficult for the development they have in mind to be supplied with all the resources promised. I’m sure the developers have the best intentions, but creating a project as big as this is almost always accompanied by problems.’”
“The initial price range of homes has been set between $495,000 and $995,000, though Brewer said he hopes that as the community develops, housing options will be available for as low as $125,000.”
The Belfast Telegraph in Ireland. “The Republic’s Planning Minister Ciaran Cuffe has blamed city and county managers for approving plans that have left hundreds of ‘ghost’ estates dotted around the country. In his first public speech since being appointed to office last month, Mr Cuffe also confirmed the Republic’s ‘bad bank’ NAMA would demolish unfinished homes in exceptional circumstances — but that the bill would be picked up by the developer.”
“Estimates of the number of empty houses and apartments range from 301,682 to 352,414. ‘There will be isolated cases where there are health and safety issues, where there’s inappropriate development in absolutely the wrong areas. The best way to deal with it may be to get rid of it.’”
“IPI president Gerry Sheeran said the advice of local-authority planners was ‘often ignored’ and the ‘victims’ of such decisions were the people ‘living in unfinished housing estates or on land zoned on flood plains.’ Such is the excess of supply that receivers are selling homes at fire-sale prices, notably in Longford and Mullingar.”
The Irish Times. “New Green Party Minister of State for the Environment Ciarán Cuffe yesterday said the blame for unfinished, or ‘ghost’ housing estates lay with ‘the ‘cargo cult’ of rezoning for all the wrong reasons’ that drove development in recent years. In his first major speech since taking office last month Mr Cuffe said ’selective demolitions will be a necessary part of the tasks required to tackle the legacy of one of the more unsavoury aspects of Ireland’s building boom.’”
“‘I have no doubt that some loans that will come into the possession of the Nama will result in the demolition of badly designed buildings in inappropriate locations,’ he said.”
“The Belfast Telegraph in Ireland. The Republic’s Planning Minister Ciaran Cuffe has blamed city and county managers for approving plans that have left hundreds of ‘ghost’ estates dotted around the country.”
As a former city planner, I have this to say about that. Can you imagine if a local bureaucrat told a developer, with financing in hand, who had met the requirement of all local ordinances, that they could not proceed due to the bureaucrat’s market analysis?
Kinda like the Irish Famine. Houses and no people.
“The country is ‘on a treadmill to hell…
And they thought they were on a stairmaster to heaven.
‘They can’t afford to get off this heroin of property development. It is the only thing keeping the economic growth numbers growing.’
Was Chanos referring to the U.S., China, Dubai or any other place in particular with that remark?
I think it was generalized toward the limitations of humanity. We are just dumb animals with fancy stuff.
It’s the SimCity economy. We’re all just waiting for someone to deploy the Godzilla.
This bubble, and it’s horrendous waste of natural resources, makes me think that mankind is doomed to fail. Here in the US, we had a housing bubble that exploded, sending the country into a depression, and our next door neighbor can’t even recognize that they’re in the midst of the exact same thing. The world is busy chopping down trees, and razing as much land as possible to squeeze every last dollar out of anyone they can, environment be damned. Despicable.
Stairway to Heaven or Highway to Hell. Led Zeppelin or AC/DC
“Running with the Devil” -Van Halen
Stranglehold–Ted Nugent
Pick one and let it rock!
On Canada: ““Flaherty did not change the rules affecting the five per cent minimum down payment..”
I listened to an hour show on this yesterday on CBC while headed back to NY. It was mentioned several times that the banks are lending that 5% on the side to get around the rules and allow people 100% financing.
But there’s no bubble.
Sounds familiar.
This “See no bubble, hear no bubble, speak no bubble” monkey business sure does get old after a few years. Is the Fed still engaged in such nonsense these days?
Hope somebody is lubing up the printing press for when the bailout is needed.
You absolutely have to travel around Toronto - especially the codo hotspots - right on the water, up near Younge and Sheppard etc. I was there 2 weekends ago for a family obligation. They are building and selling ‘luxury’ unit like hotcakes. This is how i image miami, beijing and other locations were/are
I am of course being completely jealous - but a guy that finished in the bottom 25% of my engineering class is pulling in close to $500K CDN as a RE broker. Over beer, i just tried to get him to save some for a rainy day - i am not sure that he really heard as his crackberry kept interrupting us
From the Your Home link:
‘If you can afford to wait, the market will likely be less hectic in the second half of this year. More listings and supply are also expected to come on the market, when move-up buyers return to the market as the economy improves. ‘The temporary factors that have over-stimulated the housing market, including low interest rates and fears of rate increases, are starting to lose force,’ says housing analyst Will Dunning.’
‘For some segments of the market, such as condominiums, buyers can expect to have greater choice, as an estimated 35,000 units are in varying stages of completion.’
So we have 35k units about to be completed, and ‘move-up buyers return to the market’ means people currently speculating will try to sell. This is why condos are the biggest bust when the ‘temporary factors’ end.
‘Veteran agent Mike Donia says he has seen many first-time buyers — and even experienced buyers — bid for properties that are beyond their financial comfort zone as a result of multiple offer scenarios. ‘Make sure after you buy the home that you can still have a life and you can still afford the family vacation when interest rates go back up,’ he says. ‘It’s important that you buy on value, not emotion, and not get caught up in the froth.’
‘Veteran agent Mike Donia says he has seen many first-time buyers — and even experienced buyers — bid for properties that are beyond their financial comfort zone as a result of multiple offer scenarios. ‘Make sure after you buy the home that you can still have a life and you can still afford the family vacation when interest rates go back up,’ he says. ‘It’s important that you buy on value, not emotion, and not get caught up in the froth.’
What’s this? A real estate agent making sense? We can’t have that! Revoke this man’s license!
April 2005:
‘David Lereah said, ‘My view is there’ll be air coming out of a balloon rather than a balloon popping because markets are too healthy right now. Once I start to see inventories increase in a meaningful way in some areas, then I’ll start to see where these balloons might be,’ Lereah said. ‘Right now I can’t find them.’
‘The air will come out of the balloon, but it will not burst,’ David Lereah, chief economist for the National Association of Realtors said.’
‘Lereah balanced his bullishness with a few warnings about worrisome national and international trends that could cause mortgage interest rates to rise above 8.5 percent, his “yellow flag” level. Those trends included an intractable federal budget deficit, a rise in inflation, a weakening U.S. dollar and proposed reforms to federal taxes, Social Security and Fannie Mae and Freddie Mac.’
‘Lereah balanced his bullishness with a few warnings about worrisome national and international trends that could cause mortgage interest rates to rise above 8.5 percent, his “yellow flag” level.’
Were it not for the Fed’s efforts to bail out Megabank, Inc through its MBS purchase / interest rate buydown program, perhaps we would already see 8.5 interest rates coupled with affordable housing.
Wasn’t Lereah considered the “foremost authority” on the residential real estate market at the time? Didn’t the government look to him for policy direction?
Wasn’t Bernanke considered the “foremost authority” on the economy and his job description was to notice if bubbles were forming in markets and act accordingly?
If we cannot trust our “foremost authorites”, then who can we trust?
If we cannot trust our “foremost authorites”, then who can we trust?
Each other. We have no choice.
“If we cannot trust our “foremost authorities”, then who can we trust?”
Maybe authorities that have less of a vested interest?
‘Make sure after you buy the home that you can still have a life and you can still afford the family vacation when interest rates go back up,’ he says.
Seems to me he has it a__ backwards. Try
doing that before you but the place.
“Lereah balanced his bullishness with a few warnings about worrisome national and international trends that could cause mortgage interest rates to rise above 8.5 percent, his “yellow flag” level.”
Too funny—I’m quite certain that even 7% or 7.5% rates would crush the RE markets right now.
That sounds exactly like the Silicon Valley around 2002-2004. With the hi-tech economy in the dumps many of my former classmates in college or former coworkers left hi-tech for some form of Real Estate. Several years later they tried making their way back into hi-tech without any luck. In the current economy I often see hundreds of resumes like this and I can’t help but think they’ve placed a Scarlet Letter on their career for as long as they still have something RE related on their resume. Sometimes I wonder if it’s better to put “Unemployed” during their stint in RE rather than the truth.
Good luck trying to find a job after the party is over, buddy.
In the current economy I often see hundreds of resumes like this and I can’t help but think they’ve placed a Scarlet Letter on their career for as long as they still have something RE related on their resume. Sometimes I wonder if it’s better to put “Unemployed” during their stint in RE rather than the truth.
Same sort of thing’s happening in the engineering field. Some of them left engineering to try their hand at real estate, only to come crawling back. They’re not being greeted with open arms.
I see it every day in engineering. I entered the workforce in ‘98 as a seven year student (a few things popped up, one of them being a great ski season out west demanding my “drop out of school for a semester” attention).
There aren’t too many engineers with 10-15 years of experience because of the dual effects of the dot.com and the real estate bubble. But those of us that avoided the siren calls are doing quite well, having remained in the field. Those of us that didn’t buy a house are doing even better, by being mobile.
one of them being a great ski season out west demanding my “drop out of school for a semester” attention
Hah hah, would that have been spring of 1995? I remember skiing that summer into July at A-basin in Colorado.
I’m an engineer between 10 and 15 years of experience and I wouldn’t say I’m doing quite well. Partially because I find the HBB so much more interesting than work.
lol….This lot is a bad influence Carl.
(You’re not supposed to be working on any nuke reactors, bridges, aircraft or automotive brake projects or designs in my area while you’re goofing off in here…are you Carl ?)
Carl got it - ‘95.
And my definition of doing quite well is: I have a roof over my head, I’m healthy, and I’m not looking for work.
Don’t worry, I’m not working on anything that will kill you. At worst it could lose your data but I don’t think I’ll screw up that bad :-).
Whoohoo, I’m going well by one person’s definition!
“Quite a number of projects in Beijing and Shanghai were sold out on their first day of trading. In Hangzhou, more than 4,000 people struggled for 224 apartments with an average price of 18,000 yuan per sq m last weekend, creating chaos and forcing the developer to call the police.”
Wow. Let’s hope those lengthy Chinese dragon costumes are made of inflammable materials…
with an average price of 18,000 yuan per sq
That’s almost $300/sq foot! After reading all this intenational nonsense I actually have hope for us in the USA. We’re the least screwed up “modern” nation in this regard.
Which is what I have stated for a long time. Most other countries are in worse shape than we are.
Another screwed up place is Mumbai,India. The apartments are $800/sq foot. What do you say about that?
Is India that rich now. People there say no bubble, it is all IT growth. More jobs coming to India everyday especially after US recession as companies are trying to cut costs further. Moreover,the new healthcare bill will provide many IT jobs in India as per them.
India’s a good place for cut-rate IT, but the good stuff still comes with a price tag. In short, you get what you pay for.
No. In fact, India is still horrifically poor. A third of the population lives off less than $1 per day.
And trust me, you don’t drink the water.
After 25+ years of international travel and brokering deals from Mumbai to Perth, I finally got a bug on my last trip. Two agonizing days in Zurich and then finally home. My doc told me that the lab had absolutely no idea of the identity of three of the little bugs that were in my tract. Time
healed, finally.
Imagine India would be the US but most of the country is Detroit with a couple of Beverly Hills and a middle class subdivision here and there
$800/sq ft may sound insane. Until you realize that there is a very, very limited supply for what we would consider lixury housing . There are some very wealthy people in India. As a %, it’s small. But 1% of 1 billion people is a lot of people which are concentrated in two cities, Mumbai and Bangalore for the most part. And that 1% can afford to pay $800/sq ft without a second thought.
And you think we haven’t heard that some story in the US about 5 years ago?
Been there, done that. And the supply of luxury homes exceeds all expectations.
A house next to my in-laws was for sale at $1.1 million. The owner rejected an offer for $1 million, only to settle for $875,000 later.
That owner lost the house to foreclosure, and is for sale now at $538,000.
Have you been to India? Take a trip there, see what is available housing wise and you might change your mind. The options are basically out of this world crazy expensive or slum. There really isn’t much in between. That is changing ever so slowly as the middle class is expanding but it will take a long time for Indian cities to even remotely resemble American cities.
Yeah SMF, don’t you know it’s different there?
Dejavu all over again.
Same thing happened here, a bunch of expensive, large homes all over the place. Since the homes for the rich brought more profit, more were built than normal.
Give you an idea of the crazyness. In 40 years, 5 golf course communities were built in the area. During the bubble, 24 were built.
In Miami, 20,000 condos were built in 40 years. 40,000 were built during the bubble.
It doesn’t matter how many rich a country has. Excess is excess.
In India and most places in that area, you get very, very nervous going higher than the third
floor. There is a hotel called The Blue Diamond in Pune that was built with American
engineers to US standards that is a gem,no
pun intended. Just a superb place to stay.
OK SMF, keep thinking Miami = Mumbai if you must.
Pune has just exploded (no pun intended either, after the explosion there a couple of months ago).
Ki, have there always been these kind of prices in Mumbai? If not, why?
Class A properties on the central coast run over $500.ft.
Aaah, but they have hitched their bandwagon to our improving economy, don’t you know? After all, the media has told them that our economy is now out of the doldrums!
“A couple of weeks later, Zhao, fearing he could never afford such a home if he continued to hesitate, paid 400,000 yuan more for a similar sized apartment in the same community”.
Fear and urgency know no cultural or geographical bounds. Zhao will find out how his move paid off sooner rather than later I would think.
That’s right! Buy now or be priced out forever. Miami anno 2005, China today. What do we learn? We learn that crowds learn absolutely nothing. But of course it’s different this time around…
While it’s still disappointing, I can understand how people gradually might be persuaded over the course of several generations to forget important lessons. But in the face of well-publicized, easily-available proof of devastating outcomes in the United States, Spain and Ireland, not even three years old, we have policy-makers from developed Western nations deliberately reviving property bubbles, with literate populations of those nations buying into those bubbles with absolutely everything they have financially and psychologically.
I can understand how people gradually might be persuaded over the course of several generations to forget important lessons.
I think this is different than that, though. I think in this case people are convinced that they way to prosperity for themselves and their family is to intentionally do the opposite of what those lessons taught. All their experience so far has reinforced that line of thinking. Only a small minority of us are trying to look at the bigger picture and remembering why those lessons of long ago where important rather than just thinking about how to game the system for maximum prosperity at this moment.
Can you blame them? They see the bizarro economy and watch speculators win as their paychecks shrink.
“All their experience so far has reinforced that line of thinking.”
Of course. Any Ponzi scheme looks attractive at first, and even rewards some who have the smarts or dumb luck to get out before the bubble bursts.
Mike -
Things in China are different. They have reached a plateau of permanent prosperity. They are not making any more land in China. Don’t forget that housing never goes down. Besides, how can you tell it’s a bubble…..those can only be identified after the fact.
Even if it was a bubble, I’m sure that any fallout can be contained and that any decline will simply be a soft landing.
Personally, I think the media is making too much out of this. If they would just stop reporting stories of bubbles, there wouldn’t be a bubble - the press are just fear mongering.
I wonder how China will handle the explosion of it’s bubble. Somehow, they seem to be able to paper over all of their problems with an endless supply of money. They should start studying Weimar Republic, and increase domestic production of wheelbarrows.
Not only are they not making any more land, they have a lot more people! So it’s really not a bubble after all. Get in while you still can or be priced out forever.
I’m kind of in love with the game “Crack Shack or Mansion”?
That game has been popping up everywhere, not just in the blogsphere. It would be an embarrassment to Vancouver if it wasn’t different there.
Actually Al it is different here, people in Vancouver are way more delusional than anywhere else in the world…
“The country is ‘on a treadmill to hell,’ according to hedge fund manager James Chanos, who said in January the nation is Dubai times a thousand. ‘They can’t afford to get off this heroin of property development. It is the only thing keeping the economic growth numbers growing.’”
“I can do anything better than you can
I can do anything better than you.”
When the China bubble breaks, a matter of when not whether, run for your lives to avoid drowning in the ensuing financial tsunami.
Do you think Goldman is aggressively shorting the Chinese property bubble right now? Probably pimping the “unprecedented-growth-potential” to investors at the same time…
Yup. The country at most risk might be Australia, with an economy driven by commodity exports and a ridiculous housing bubble of its own. I think the country is likely to experience the worst bust in its history.
This entire collection of articles is deeply disturbing. I feel like a passenger in a hijacked plane — my life is in the hands of irrational fanatics for whom it means nothing. I remember the end of the year in 2007, when in the course of wishing everyone a Happy New Year I remarked that this blog was winding down. I was wrong on that!
I’ve had the afternoon to think about it, and I can’t get over that story from the Melbourne paper. The Raes’ grandson is buying a severly overpriced, run-down house with the help of $40,000 from his parents. He works “in the family spa business.”
I’m going to go out on a limb and say that demand for spas might fall by 75% once the Australian housing bubble pops, unemployment rises, and credit contracts. That business will be lucky to survive, and the grandson will be lucky to have a job. The grandson’s house is almost certain to be foreclosed on, in which case the wealth of three generations will have been destroyed.
PB, do you think “equity locusts” from China are keeping the SD market jacked up, much as Cali did for the rest of the country a couple of years ago?
“No, you can’t
Yes, I can
No, you can’t
Yes, I can
Yes, I can, yes, I can, yes, I CAN!!!”
(no, you can’t)
“‘These are the most draconian measures on the property market in history,’ Jun Ma, Deutsche Bank AG’s Greater China chief economist, said in a note to clients. Chinese press reports point to ‘panic selling’ by investors who own more than one home in Shanghai, Beijing and Shenzhen, he said.”
“Investors should ‘avoid the property, banking, steel and construction material industries,’ Morgan Stanley Asia Ltd.’s analysts Jerry Lou and Allen Gui wrote in a research note dated today. ‘The harsh tone in Saturday’s statement suggests that containing property price is now the top item on Beijing’s agenda.’”
Sounds awesome! W, Big Hank and Ben have nothing on the Chinese government regarding the ability to spark a home-grown financial panic.
P.S. A friend who goes over to China now and again to buy investment property for his firm’s clients told me a couple of days back that they are about to go public. I joked that this is normally a sign of financial problems ahead.
“With house prices across the nation showing double-digit gains over the past year it may not be a coincidence that Channel Nine is now reviving The Block, its 2003 property show that epitomised Australia’s exuberance for bricks and mortar during the previous boom.”
Wait. At first I was thinking they had only one boom and that it must’ve lagged ours. You mean they’re on boom 2 in about 7 years? Is this what we have to look forward to? I don’t think I can do another round of 2002-2007.
Maybe Kendra Todd should go there and get a job as guest host for the show.
Kendra-
now there’s a nameI haven’t heard in a while. She used to get frequent commentary here on the HBB.
I always liked the quirky looks she would give when the flippers would make some goofy suggestion.
Kendra is being sued for breach of fiduciary duty.
Kendra “Bubbles are for Bathtubs!” Todd
Casey “I lied to the banks” Serin
Nigel “Don’t pick on Casey” Swaby
Suzanne, I researched this!
Oh, I fogot about Nigel.
If you want to vomit, take a look at this:
http://growrichgodsway.com/kendras-chat-with-pat/kendra-todd-kingdom-entrepreneurship/
Kendra Todd; getting rich God’s way. I guess that way would be to lure unsuspecting rubes into RE transactions that will lead to their financial downfall.
I must have missed that in the Bible.
And I seem to recall hearing the priests say, “Let your light so shine before all men so that they may see your good works and glorify your Father who is in heaven.”
I watched the clip. If Pat Robertson squinted any more, I’d swear he’d be blind. And that chuckle—I want whatever he’s on.
‘I was thinking they had only one boom and that it must’ve lagged ours’
Some links from 2005:
‘China Cuts Off Housing Bubble Commie Style’
‘China ended the favorable interest rates for private housing loans Thursday..At the same time, the minimum down payment in cities with rapid housing price increases was raised from 20 to 30 percent. By the end of February 2005, outstanding commercial housing loans exceeded 1.65 trillion yuan ( US$200 billion), accounting for 23 percent of the commercial banks’ medium and long-term loans.’
‘If the housing bubble burst and the borrower could not make the repayment, the commercial banks will be faced with a large amount of bad debts.’
‘RE Speculation Is Global And Connected’
‘Some suggest that their members can buy new flats for discounts of up to 30 per cent. Supposedly they can negotiate these cheap deals by taking a number of flats in a new development at an early stage, and so get a ‘wholesale’ price. The members only stump up 5 per cent as a deposit. The number of buy-to-let mortgages in the UK has soared from 28,700 in 1998 to 526,200 last year.’
‘As a last gasp, a number of the off-plan agents are pushing overseas property in places such as Spain and Florida. Gambling on new schemes in faraway markets is the stuff of madness. The room for error is huge.’
‘Remarkably Similar Housing Bubbles Worldwide’
(China) ‘The property market has witnessed four consecutive years of sizzling growth since 2001. Investment has risen sharply and, despite soaring prices, housing sales are also brisk. It is time for the government to intervene in the redhot housing market, otherwise it runs the risk of spiralling out of control. For many would-be urban home buyers, their dream of owning a home continues to disappear as house prices surge nationwide.’
‘China Worries About Housing, Cracks Down’
‘China’s rising property prices pose a threat to the stability of Asia’s second-largest economy. Excessive growth in housing prices has directly undermined the ability of city residents to improve their living standards, affected financial and social stability. Local officials who fail to take measures to rein in growth will be held to account.’
‘The State Council’s tone is very harsh,’ said Fan Weiwei, a Beijing-based economist.,’People’s expectations of future property prices will definitely be changed. The likelihood of further price surges is becoming minimal.’
‘Some Sydney, Australia Home Prices Down 40%’
‘A report reveals the price of hundreds of properties across Sydney on sale since before September have dropped by as much as 40 per cent. Auction clearance remains low..sellers are being forced to adjust reserve prices. These are the ingredients of a buyer’s market. A three-bedroom terrace first listed last May for $980,000. Now it’s a bargain buy for $580,000. A luxury apartment first listed in March 2003 for $2.79 million is for sale for $1.95 million - a fall of $840,000.’
‘We have come down a long way and want to sell. We’d never have put it on the market if we had known it would be like this’. Ms Allen said the family hadn’t considered an auction as it would be embarrassing, with the neighbours coming through and no one bidding.’
‘17 Years Later Prices In Japan Rise 1%’
‘Residential prices in central Tokyo rose 0.9 per cent in 2004, the first rise in 17 years. When the bubble burst property prices plummeted more than 80 per cent, undermining company balance sheets, wiping out many families’ wealth and helping plunge the economy into 13 years of stagnation.’
‘Despite strong growth in the cities, the survey said prices nationwide dropped 4.6 per cent, the 14th consecutive year of decline…on average, residential property prices in Tokyo were 41 per cent of their peak in 1991, while commercial property prices were 20 per cent of their peak value.’
I could go on…
I’m sure ya could! Admittedly I haven’t paid much attention to the cycle of the Aussies. But that grand finale on Japan puts it in perspective. We just might have another go at it. And then the long slog down. Just another painful reminder of how long this thing could take to play out in its entirety…
I’ve had the benefit of watching this stuff full time for years, and it’s still hard to get my head around the whole picture. I’m sure that years from now, someone will try to piece the entire mania together, but right now it’s not even clear where the beginning is. What year was it that Greenspan first spoke of irrational exuberance?
One thing I think about is, when does a boom turn into a bubble? Also, there is a bit of truth behind most manias, others, like the tulip mania are based on nothing. When we are in the middle of the thing, it becomes difficult to know what’s real and what’s not. For example, there are a few internet stocks that had true value, but not at the price levels commonly believed years ago.
Another aspect that many overlook, IMO, is that these events build upon themselves for so long, that irrational behavior begins to look normal. And that is why, when reality sets in, the declines are considered unimaginable.
It’s deju vu all over again…
What is truely amazing is the number of suckers that buy into the frenzy. A quick look into the very recent history and it should become sufficiently clear what the outcome of current real estate bubbles in China, Australia, UK and Canada will be.
Any ideas how to personally profit from the stupidity of others? Are there any real estate ultra bear funds out there? Is AIG still issuing CDS on bubbly real estate loans?
I will say I was encouraged late last week while with some RE lawyers. They were discussing foreclosure issues and, if I heard them correctly, stated that the large banks were 1-1.5 years behind on processing foreclosures and want to bring that to within 30 days. They were in agreement that over the summer and fall, folks like BofA will be processing foreclosures en masse. So, we might be at the tipping point with people living in their homes for free with no NOD, foreclosure, etc. Both were also in agreement that effect will quickly redirect this market (as well as others) downward.
When they say “processing”, do they mean “taking and putting on the market for a quick sale”, or do they mean “taking and sitting on for a few more years”?
My understanding was that the intent was to clear inventory. I suppose it could mean some sort of modification for some, since that would have the same effect on prices, but the context in which they were speaking was one of getting the non-performers off the banks books through fc sales.
“How much should two chicken pancakes cost? For Zhao Rui, a 28-year-old company executive in Beijing, they cost him 400,000 yuan when he missed the chance to buy a home at a lower price during his lunchtime.”
1 Chinese yuan = 0.146512 U.S. dollars (according to Google).
So those two chicken pancaces cost 0.146512*400,000 = $58,604.80 in American money; hope they were delicious!
The bank financing this deal is going to be the one who really gets to eat it. Hope the bank likes pancakes.
The bank could become flat as a pancake.
Our friend Zhao’s lunch break offered him an opportunity to avoid making a nasty financial blunder. Instead, the guy comes back a second time and drops even more money on the table.
What is it about the human psyche that makes us so vulnerable to these “manias”? Does peer pressure really have as much power as those drug commercials always insisted?
Can someone enlighten me as to how to make a chicken pancake? It sounds barely palatable, but then again we’re the nation that just gave the world the KFC “Double Down.”
Well actually Canada didn’t get the KFC double down. But it DID get the housing bubble disease.
Why Flaherty didn’t require 25 yr. amorts and 15-20% down is beyond me.
Banks creating loopholes around the 5% (I’m talking to you TD Canada Trust) are not helping matters.
“Except for the 18,000 yuan per square meter price,…”
1 meter = 3.2808399 feet
1 Chinese yuan = 0.146512 U.S. dollars
18,000 yuan per square meter = 18,000*0.146512/3.2808399^2 = $245 per square foot — no worse than San Diego.
Not if everybody there is on San Diego wages.
Strawberry pickers buying $750,000 houses anyone?
1 meter = 3.2808399 feet?
One SQUARE meter equals 10.7639104 SQUARE feet.
My point.
So, at about $80/square foot these crappy condoze are a screeeeming buy! How do I get in on flipping these?
PB’s calculation is correct. He did square the value. Tye are sellinmg for $250/ sq foot.
And even at San Diego wages that is unaffordable.
What difference does it matter what they cost, they are going up every time someone eats a pancake! If I bought one (or ten) today and ate pancakes for a week…
How do I get IN? !!!! That is the only question you should be asking.
“3.2808399^2“
‘no worse than San Diego’
‘For people on average incomes in Beijing and Shanghai, a regular two-bedroom apartment may cost them 20 to 30 years’ income’
Then they compare bubbles:
‘far higher than the international average of six years’
6x prices are mind boggling, even if San Diegans consider them “normal”, but 30x? Holy Cannoli! Even at 3.33% interest it would take one’s entire income to just pay the interest. And I doubt that interest is tax deductible in China.
Does anyone know what the volume of sales actually is? Is everybody buying something, even if its just a 200 sq ft shack, or is it just the educated upper class that’s buying before they get “priced out forever”? Granted, with China’s size if their middle to upper middle class is just 20% of their population that’s the same size as the American middle class, so when their bubble pops we will definitely be living during “interesting times”
20% of the Chinese population is almost the size of the entire U.S. population.
We heard Lang Lang play on a La Jolla music festival concert last Saturday. The program said he has inspired 35 million Chinese children to take piano lessons. My thought: Isn’t that greater than or equal to the entire U.S. child population?
P.S. The gay couple sitting just to our left hooted and hollered when Lang Lang finished playing, but we were nonplussed.
WikiAnswers
Q. Is the chinese pianest Lang Lang gay?
In: Celebrity Sexual Preferences
A. Yes.
The pianist who is more famous than the Beatles
Creado por langlangweb de April 8, 2009 - 1:39pm
There is no question who is today’s number one in classical music, measured in terms of world fame.
A decade ago it would have been Luciano Pavarotti, before him Maria Callas. The storm-tossed diva was preceded by Arturo Toscanini, who had 40 percent name-check recognition among adult Americans, and before him there was Enrico Caruso, the first best-seller on record. These four dominated the first century in human history when music was industrialised and reputation manufactured.
Pavarotti’s death in 2007 left music without a luminary - but not for long. Opening last summer’s Olympic Games in Beijing, resplendent in a rock-star white suit with a fairy-child accompanist amid a sea of green elves, the Chinese pianist Lang Lang launched himself into a stratosphere of celebrity. Five billion people watched, and remembered.
In China, Lang Lang, 26, was already the yes-we-can symbol of future world power. His picture is blazoned eight storeys high up the side of buildings from Hong Kong to Harbin. Some 30 million children are being taught to play the piano in the vain parental hope of emulating his achievement. Concert halls are being built in the expectation that he will play in them.
Since the Olympics he has become a global brand who plays New York’s Thanksgiving Day Parade, London’s Royal Variety Performance and the Nobel Prize concert in Stockholm. Adidas named a shoe after him. Sony and the China Merchant Bank use him as a salesman. He occupies a realm of stardom far beyond the quavering concerns of classical music - and yet he remains, decidedly and in principle, a dedicated classical musician.
At the end of this month, Lang Lang will have a week’s residency at London’s Barbican Centre, playing astringent Bartok, a new concerto by Tan Dun and a solo recital. The moment his name goes up on billboards, you can take 20 years off the audience age and expect a certain sniffiness in the reviews.
There is a painful dichotomy in classical attitudes towards Lang Lang. One part of the concert world desperately wants his youth and glamour, the other part wishes he could be, well, a bit less fresh-faced and spiky-haired, a bit less loud. Few understand what makes him tick, why he plays as he does, whether he is gay or straight and where the hell he is taking the western pianistic tradition.
…
Current estimates
According to estimates by the San Diego Association of Governments, the median household income of San Diego County in 2005 was $64,273 (not adjusted for inflation).
For bubble order of magnitude estimation purposes, let’s consider a 2000 sq ft home at the recent price around $210 per sq ft, according to Radar Logic. The ratio of SD home price to income on this basis is $210*2000/$64,273 = $420,000/$64,273 = 6.5 times income.
Lower than before, but still too high — and good luck at finding a 2000 sq ft home for $420,000!
“18,000 yuan per square meter = 18,000*0.146512/3.2808399^2 = $245 per square foot — no worse than San Diego.”
Yeah…and in San Diago, you get a better quality of smog for your money than in China to boot.
Smog is one thing which is not much of a problem here, thanks to prevailing coastal breezes which push our smog over the crest of the San Diego mountains into someone else’s breathing space.
Imagine living in China with some entreprenuer mixing up batches of lead-paint in the basement of your high-dollar condo.
‘We thought we would be buying in one of the best buyer’s markets and we ended up being thrown into these crazy bidding wars,’
Many people experience something like this. People are getting tired from all the competition, they won’t fight for the house unless they’ve got the feeling it’s the home of their dreams. Everybody’s talking numbers when predicting what will happen next, but they’re forgetting about the human factor.
‘They bid more than half a million dollars on the property, beating out two other bidders. Bisoukis was actually in New York when Millis made the bid. ‘He said we would lose it if we didn’t bid right away,’ she recalls. Returning from New York later in the week she had ‘about 20 minutes’ after seeing the home for the first time to up their offer.’
Well, this person spends 20 minutes looking at something that costs half a million? I often make a bigger effort on a $100 purchase.
‘Their new home is a 1,900-square-foot, 40-year-old renovated bungalow that they moved into last month. ‘It’s not a palace. But it’s our palace,’ says Millis.’
Home of their dreams, indeed…
Before this Bust is over, The Diagnostic and Statistical Manual of Mental Disorders (DSM) by the American Psychiatric Association, will probably include some BS diagonstics and treatments for conditions of Long Term Buyer’s Remorse, Chronic RE House Arrest and Sheer Stupidity Syndromes.
Auhh…what the Hell, these FB and GF’s have to be high on some kind of drugs now, just change the brands, sock it to them and charge them twice Doc.
I’ve been working on a DSM edit to inlude MEW in the section on substance-related disorders! Good call.
SB
“People are getting tired from all the competition, they won’t fight for the house unless they’ve got the feeling it’s the home of their dreams.”
People are also forgetting that the crazy bidding wars are a hallmark of a mania; unless this time is different, this real estate mania will end in tears, just like all of its historical predecessors. Many who stepped up to the plate to buy in a bid war frenzy will be surprised at just how far prices can fall from levels some thought were already at the bottom.
When all the laughter died in sorrow…
Once the bidding wars shift to the less desirable areas, the jig is almost up.
Those areas are the last to rise and the first to fall.
“For people on average incomes in Beijing and Shanghai, a regular two-bedroom apartment may cost them 20 to 30 years’ income, far higher than the international average of six years.”
“Under the new rules, down payments for second homes must be at least 50 percent, up from 40 percent, and mortgage rates can’t be lower than 110 percent of benchmark rates, the State Council said. Banks should also raise down payment ratios and rates for third homes ‘by a broad margin,’ it said.”
I wish that type of standard would apply in the U.S. Why should we let investors push up the price of housing so far that many people can’t afford to buy a first house, a primary residence?
Of course, if that standard applied to first home buyers in China under current circumstances, they’d have to save up 10 to 15 years of income for a down payment, clearly impossible for most people.
Oh come on.. Something’s not right with those numbers.
Just to use round numbers; that would mean someone making 100K a year is buying a house that costs 2-3M dollars? There’s no way, there’s no financing on earth that can make that affordable, not even for a little while.
The worst I saw in my area was about 10X income; and even that is total financial suicide. 20-30X? There’s simply no way, something’s wrong with those numbers.
I don’t think so. I was listening to a NPR report on a possible bubble in china last week and they said clearly that the ratio in bejing was around 50. Then they had some people on saying it was OK cuz these buyers incomes will be going up so much over the next decade or two.
I suppose that’s reasonable. With all of the house/condo flipping over the next couple of decades they will all be Trumps.
Man.. They got themselves some very “sophisticated” bankers over there, that’s for sure. Our stupid American banks can’t seem to make the numbers work at 10X income!
Just another reason that China is going to take over the world. Their banks are so much smarter than ours!
Dumb question?
Do the Chinese use Chinese drywall?
They use plaster.. mud.. straw.. depending. I dunno about sheet rock. It’s a relatively new development (25 years?) even here in the States. Plasterer’s Unions fought it.
..Workers in Shanghai, for example, were allowed to buy the 20-square-meter apartments—they previously rented for 60 cents a month— from their companies for about $3,600 (about one tenth of their market value) so the government could raise money…
60 cents a month for rent? Renter’s commie-paradise.
Things have changed so fast in China, whole housing thing seems to be a cluster#@$% over there…
Here’s a page with some general info.. more than I’d wanna know about Chinese home ownership:
http://factsanddetails.com/china.php?itemid=154&catid=11&subcatid=71
for $240/sq foot I get straw-reinforced mud walls? I’m in!
It’s a good thing they never have earthquakes in China..
Probably not, since they most likely build houses and apartments out of brick, cinderblock and concete.
oh, my pity american fellows bubbleheads! There may be wide spread stupidity and plane madness on the side of the chineese “investors”, but at least I see wise comunists trying to confront the rising problem, not riding it for their own profit ( aka american oligarhy in action till this very moment). Oh my pity american fellows!
I don’t see any “wise communists” attempting to “confront the problem”. Instead, I see various Chinese bubbles expanding and the Chinese government attempting to pass this off as “explosive economic growth”.
Not oligarchy? Not?
I was just surfing for info on chinese home construction and saw a page that said 0.4% of Chinese own 70% of everything..
can i possibly find it again? Here we go..
..[snip]The Chinese government controlled allocation of national resources, and they could carry this out without any public supervision. The so-called “reform” turned into a process of the ruling class snatching public (including individually-owned) wealth by capitalizing on their power.
The Boston Consulting Group’s 2006 Global Wealth Survey presents a telling story on the concentration of wealth. The report reveals that 0.4 percent of the families in China (about 1.5 million) possess 70 percent of the nation’s wealth.
This calculation only included savings, stocks, and other disclosed financial assets, and did not include any unofficial income.
In other words, over its 60 years of rule, the CCP completed a historical turn-around—violence eliminated private property ownership and government power created the nouveau riche…
http://www.theepochtimes.com/n2/content/view/23519/
re: China RE Bubble –
Never get in the way while your adversary is destroying himself. Perhaps this is the result of all those WalMart* dollars looking for a place to go now that the Chinese decided not to buy our treasuries.
I think to understand China and India, think of them this way. Within a decade or two, within those countries, you will have a population as large and rich as that of the United States, on average. Equal to the U.S. in every sense.
Surrounded by four times as many people in poverty unimaginable here.
As long as the poor are gradually becoming better off than they were, things will be great in these countries. But if you have a period of years — say a recession — where things are becoming worse for them, you might get a reaction that makes the Tea Party look like a tea party.
“Within a decade or two, within those countries, you will have a population as large and rich as that of the United States, on average.”
I am thinking maybe the uppermost 300m Indians (30 percent of the population) in the wealth distribution are already there?
“‘With a spare 400,000 to 500,000 yuan at hand, could you find a better investment channel than buying properties?’ said Li Yan, a businessman working in Wenzhou and Beijing.”
Wow, that is certainly bubble-thinking! Great find, Ben…
My one thought on the possible-bubble in China is that they do have a serious demographic shift going on, in that people are demanding more western-like lifestyles; that may tend to cause a dramatic rate of household formation, as their traditional multi-generational household gives way to single-generation households.
Whether that will diminish the seemingly-likely bust that will follow such a boom, I do not have a strong opinion.
“…in that people are demanding more western-like lifestyles…”
Funny, because there are people here that are demanding more Western-like lifestyles too!
Some see it through the windshield and some through the rear view mirror.
“In Hangzhou, more than 4,000 people struggled for 224 apartments with an average price of 18,000 yuan per sq m last weekend, creating chaos and forcing the developer to call the police.”
If people are RIOTING because there are too many people competing for too few apartments, then they are clearly not charging enough for them! Oh, that, and the developers should all hurry to build LOTS more of them.
Does that quote remind anyone else of the all-night camping-out-in-line people were doing for condos that weren’t even build yet during the last year or so before the peak in the US?