Entering A Winter Season
Readers suggested a topic on implications of the China housing bubble. “What are the implications for the U.S. housing market of a collapsing Chinese housing bubble? For instance, will the number of all-cash Chinese investors snapping up U.S. homes at fire sale prices decrease?”
A reply, “Are the Chinese investors coming here with money from cash-out refinancings or from business profits? If the latter, there still could be a slow down in the investors coming over, but there might be some delay on the impact. Or there could be a big surge (get the cash out of China) followed by a slow down. I doubt this is a simple relationship.”
Another said, “If the Chinese investors are anything like the ones I’ve seen in this nabe, prepare for a lot of lousy landlords. As in, they have trouble understanding English when it comes time to maintain or repair anything. But don’t dare be a nanosecond late with your rent.”
From Reuters. “The monumental, neo-Mongolian sculptures, empty plazas and hulking concrete shells of buildings in Ordos district, deep in the steppes of Inner Mongolia, are a potent symbol of how China’s property boom can turn to bust. Off the back of a thriving coal industry, the local government has been building a new city for one million people called Kangbashi. It sits virtually empty and property prices are falling.”
“‘People are worried. Especially if they have bought two or three apartments,’ said Yu Mingjun, a worker sitting in a down jacket at a ramshackle office of a half-completed project in the old town.”
“Prices in Ordos have already fallen below the level that analysts say would cause serious problems if mirrored nationally. Prices have plummeted 20-30 percent in certain property developments in Beijing and Shanghai. ‘The decade of explosive growth in China’s real estate industry has gone. Developers must think about a shift in their strategies now and aim for the long term,’ said Qing, president of Beijing Zhongkun Investment Group, a Chinese developer. ‘China can undertake a home price cut of up to 30 percent. But I’m not sure about what will happen beyond that.’”
The BBC. “‘The current crisis is grimmer and more challenging than the global financial crisis triggered by the Lehman Brothers bankruptcy in 2008,’ China’s Vice Finance Minster Zhu Guangyao told a forum in Beijing on Thursday. ‘At that time, the world economy maintained growth, and world leaders… rolled out a massive fiscal stimulus and monetary measures… so that the crisis was to a large extent contained and economic recovery was achieved in a relatively short time.’”
“The problem is that now things are different. It is far harder for China and other nations to roll out new stimulus measures. The shock this week was the news that China’s massive factory sector, responsible some say for 40% of GDP, is now contracting for the first time since 2008. While China’s manufacturing is having a tough time, so too is another important part of its economy, the housing sector.”
From Bloomberg. “Early in the morning on Nov. 25, Ren Zhiqiang — one of China’s wealthiest, most famous and arguably most detested real estate developers — posted a question to his 5 million followers on Sina Weibo, China’s most popular microblog. He asked: ‘Is there any country in history that has managed to grow its economy stably after a property bust?’”
“Ren Zhiqiang and many Chinese homeowners now find themselves with negative equity. But for Ren, what makes it considerably worse is that this crash is, in large part, a bureaucrat’s bet that the long-term health of the Chinese economy is best served by purposely tanking the real estate market now, rather than waiting for it to tank on its own. He took obvious exception to this on Weibo: ‘I wake up this morning and find the radio, TV and print media all going on and on about how the property market is entering a winter season as real estate prices tumble. I don’t understand — are these macroeconomic adjustments here to help stabilize economic development, or are they here just to make property prices fall?’”
“On Nov. 29, Beijing Youth Daily, the official newspaper of the powerful Communist Youth League, published ‘A Minimum Price Drop of 50% Is Acceptable.’ It read: ‘How much is a reasonable drop in houses prices? We ought to take the acceptance of the common people as the standard, and whether or not they can accept the price directly related to their income. So, housing price-to-income ratio, which is a common index around the world, becomes an important standard for measuring the housing slump. According to the 1:6 housing price-to-income ratio, at least a 50 percent fall in the Chinese housing prices appears to be reasonable.’”
“Qiu Zhenhai, a commentator on Hong Kong-based Phoenix TV, a station with close ties to Beijing, tweeted on Sina Weibo: ‘The housing price problem has torn Chinese society into two pieces. One half is the homeowner group and the other is the non-owning group. The former not only wishes that the housing price will not drop, but also wishes it to rise steadily. The latter not only wishes the housing price will drop, but wishes that it drop sharply … The latter aren’t very influential, but they do have the energy to riot.’”
The Architectural Record. “While the U.S. construction market remains in the doldrums, Toronto’s real-estate sector has been humming along since the late 1990s, with only a brief slowdown in 2008. Today, the research service Emporis is tracking 147 high-rise buildings, among other projects, under construction in Toronto. For a site along a busy road in the exclusive Yorkville district, the local firm Hariri Pontarini Architects is designing a six-story luxury condominium with limestone and glass cladding. Its 10 units (starting at 1,800 square feet) are priced from $2 million to $5 million; half have sold.”
“Over 50 percent of Torontonians are now foreign-born—make the city attractive to young people. Indeed, many of the new towers are catering to single professionals and young families who want urban lifestyles and are willing to live in small spaces. A 500-square-foot condo in the downtown area costs at least $300,000. For projects with rental housing, many of the landlords are recent immigrants, from China or South Asia, who see real estate as a solid, long-term investment.”
The Arizona Republic. “Thirty years ago, Arizona’s snowbirds were a largely monolithic flock. They stowed months of supplies in their RVs and fled the cold Midwestern winters to soak up the sun at mobile-home parks in the East Valley. Snowbirds, also known as seasonal residents, have since evolved into a richly diverse group. Canadians, motivated by their suddenly strong dollar, are now descending in droves, many abandoning Florida’s sunny beaches for the desert landscapes and lower property taxes of the Southwest.”
“Baby Boomers in their 50s or even late 40s — at least those who can afford to buy second homes or condos — are a newer breed of winter visitor. The trend toward home ownership accelerated over the past decade as Baby Boomers, born between 1946 and 1964, started to snatch up retirement and investment homes in the down market. Judy Lutes, president of the Arizona Winter Visitors Association, a group that provides services to snowbirds, said the Boomers have a distinct difference in taste from their parents’ generation, preferring resort-style living over the close-knit RV parks.”
“‘Shuffleboard and stuff–that doesn’t impress them,’ Lutes said of the Boomers. ‘They’re into homes and condos.’”
“Michael MacKenzie, executive director of the Toronto-based Canadian Snowbird Association, counted 556,000 of his countrymen alone who migrated to Arizona last year. He expects even more this year. The Canadian dollar, which in 2002 was worth 62cents to the American dollar, now is worth closer to 95cents. ‘That has a huge psychological impact on Canadians,’ MacKenzie said. ‘A lot of people who for years were renting are now buying. People who owned are now upgrading. Most Canadian snowbirds are driven by price and real-estate values are good.’”
From Moneyville. “On Dec. 6 officials of the Canadian Snowbird Association land in Washington to lobby for passage of the proposed ‘Canadian retiree visa.’ It would allow Canadians over the age of 50 to stay in the States eight months, instead of the current six, if they own a home or plan to rent there.”
“It’s part of a broader bipartisan proposal, the VISIT-USA Act, that is working its way with uncharacteristic speed through the U.S. Senate and House of Representatives. It’s aimed at kickstarting the decimated housing market by offering foreigners a three-year residential visa if they invest at least $500,000 in real estate. A least half that has to be on a home where they plan to live at least six months of the year.”
“At the same time, the U.S. is aggressively wooing wealthy Canadians willing to invest at least $500,000 for a minimum of four years in economically depressed regions of the U.S., says Toronto-based immigration lawyer Andy Semotiuk. Canadians are the biggest foreign purchasers of U.S. residential real estate and own an estimated $50 billion worth in Florida alone.”
“Shant Epremian left his six-figure Toronto job three years ago to start buying Florida real estate. He turned that lucrative hobby into a thriving business, Pink Realty of South Florida, and now has a staff of 20 who help Canadians look for properties. ‘Americans may not be welcoming of some other nations in the world, but they absolutely love Canadians,’ says Epremian. ‘We joke at seminars (for Canadian house hunters) that the president and the governor of Florida would like to thank you for your contribution to the bottom line of the United States.’”
http://www.globalpropertyguide.com/investment-analysis/Global-housing-markets-struggling
‘The world’s housing markets had a weak third quarter of 2011, according to the latest survey of world-wide house price indices prepared by the Global Property Guide. During the year to end Q3 2011, house prices fell in 25 countries, of the 44 countries for which quarterly house price statistics are available, and rose in only 19 countries.’
‘India and Brazil’ housing markets have continued their spectacular outperformance, with Delhi house prices up 22.68% during the year to Q3 2011, according to National Housing Bank (NHB) figures. The worlds second strongest quarter-on-quarter house price rise occurred in an unexpected city - Vienna, where house prices surged by 5.44% during the quarter (and +4.25% on the year), continuing 6 years of nearly unbroken price rises for Austrias capital.’
‘The Baltics have also performed strongly. Latvia is the third best performer among all reporting countries in our survey over the twelve months to Q3 2011. In Riga, standard type apartments rose 13.31% year-on-year, a quick comeback after a fall of 5.40% in the second quarter.’
‘Following Latvia was Estonia, whose housing market is rallying after three years of terrific losses that began during the onset of the global financial crisis. During the year to end Q3 2011, house prices in Tallinn were up 12.30% with a quarterly rise of 2.71%.’ ‘The Irish housing market remains the worlds weakest performer. House prices were down 15.61% year-on-year, the steepest decline since 2008. Quarter-on-quarter, Irelands house prices slid 4.25%.’
‘Several other European housing markets experienced accelerated downturns during the year ending in the third quarter of 2011, including Netherlands (-5.20%), Portugal (-6.77%), Slovak Republic (-7.94%), Warsaw, Poland (-7.95%), Spain (-8.41%) and Bulgaria (-9.65%).’
‘In New Zealand, median house prices were down 4.30% from a year earlier, with a quarterly house price fall of 2.26%. High interest rates and global economic uncertainty have continued to impact the Australian housing market, and it slumped 5.55% in the year to Q3 2011, the third quarter in which annual house price falls were reported this year.’
‘In Asia, several countries had house price increases during the year to end Q3 2011, albeit less strong than last year, following the government measures to curb the heat in their respective housing markets. In Hong Kong, house prices were up 12.07% year-on-year, after a rise of 19.30% the previous year. In Malaysia, house prices rose by 3.15% year-on-year, after a rise of 5.76% during the same period last year. In Singapore, house prices rose by 2.73% year-on-year, a big drop from last years 18.96%. In Taiwan, house prices were up a mere 0.46% year-on-year, after a rise of 6.97% during the same period the previous year. During the latest quarter, house prices were down 7.02%.’
China’s economy is especially sensitive to rising commodity prices, especially oil. Thankfully, oil prices should remain relatively stable and geopolitical turbulence should not affect China’s primary oil suppliers.
http://uk.news.yahoo.com/iran-tv-us-spy-drone-shot-down-military-150224269.html
Or not….
Yeah, and they buy a lot of commodities from Australia. Opps!
It’s amazing that so many people cannot connect the dots.
Bernanke can’t print oil.
“What are the implications for the U.S. housing market of a collapsing Chinese housing bubble? For instance, will the number of all-cash Chinese investors snapping up U.S. homes at fire sale prices decrease?”
The Chinese housing bubble is popping as we speak
Which will pop the commodities bubbles (except maybe for gold)
Which will hasten the already popping of the housing bubbles in Canada, Australia, Brazil, etc.
The few Chinese that sold at the “top” will make out like bandits.
The rest will be like the American wanna-be Donald Trumps who (on paper at the peak) had millions in assets and were living large but now are all in foreclosure and bankrupt and demanding bailouts.
PS – The Chinese don’t do bailouts of homeowners…
This will be fun to watch. That one article did mention that in China there are two groups: Those who have money in real estate and those who do not, and the first group wants price supports while the other group wants to see the prices fall a lot.
Seems very similar to our situation! Let’s see. They had price run-ups from 2004 to 2009 while ours were from 2003 to maybe 2007. They will be in dire straits at least through 2016 or 2017.
I hope for their sake the group proportions are different, so maybe they actually have hope of the price support supporters being outnumbered.
“The Chinese don’t do bailouts of homeowners…”
In this sense, their economic governance is more capitalistic than is America’s.
These are the easiest to sue….and especially if they try to self evict you..Call the cops and press charges..Judges hate the “I’m King of My castle” landlords.
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As in, they have trouble understanding English when it comes time to maintain or repair anything. But don’t dare be a nanosecond late with your rent.”
http://www.spiegel.de/wirtschaft/unternehmen/0,1518,801598,00.html
Spiegel says Commerzbank is about to get nationalized. (Use Google Translate to get gist of article). This is one of many non-US bank that pulled up to the trough at the Fed discount window back in 2008.
Asian money is nothing new in the US market, especially in the west coast. Back in the early 1990s I was in grad school at the UW in Seattle. I rented a mother-in-law apartment from a woman who was a real estate agent. She had only one client, a group of Taiwanese monks. Basically all she did was cruise around the greater Seattle area looking for good real estate deals and would snatch them up on their behalf. It was all quite secretive and the purchases were all cash purchases through some sort of corporate structure. But she told me there was a huge spigot of Asian money investing in Seattle area real estate.
“It’s part of a broader bipartisan proposal, the VISIT-USA Act, that is working its way with uncharacteristic speed through the U.S. Senate and House of Representatives. It’s aimed at kickstarting the decimated housing market by offering foreigners a three-year residential visa if they invest at least $500,000 in real estate. A least half that has to be on a home where they plan to live at least six months of the year.”
I wonder how many Russian and East European mobsters, and Chinese embezzlers fleeing prosecution, are going to take advantage of this good deal and proceed to launch new criminal ventures in their new host country.
Probably a bunch of them.
Maybe that will be the USA’s new paradigm. A safe haven for all the robber barons, mobsters, tax cheats, crooked politicians. Our government knows how to treat these people in the style that they have become accustomed, so what could possibly go wrong?
Sorta like “Escape from New York”, except the guns on the walls will be pointing out, rather than in.
Maybe that will be the USA’s new paradigm. A safe haven for all the robber barons, mobsters, tax cheats, crooked politicians.</
“Maybe”? Where have you been? It’s been that way for at least a decade. And in 2008, 95% of the electorate voted to keep it that way.
Just wanted to make a quick point - Ontarians & Manitobians lose our healthcare coverage here if they are out of Canada for more then 6 months (I imagine the other provinces are the same)…
Given people the ’snowbird’ age tend to use the health system here more then the avg person, why they would risk loosing coverage for 2 more months doesn’t make sense.
My uncle rents a place in Florida for 6 months but is always careful to to get back to Manitoba to maintain coverage.
One of the things most noteworthy to me about this proposal, is that it is the “bi-partisan” baby of senators Mike Lee and Chuck Schumer. Mike Lee was the candidate that won in Utah in 2010 after the tea-party activists sent Bob Bennett packing. Chuck Schumer is, well… Chuck Schumer.
Supports my contention that, the real time to worry about events in Congress is when you hear how something is a “bi-partisan effort”. For all of the posturing, there really isn’t a dime’s worth of difference most of the time, is there?
“‘Americans may not be welcoming of some other nations in the world, but they absolutely love Canadians,’ says Epremian. ‘We joke at seminars (for Canadian house hunters) that the president and the governor of Florida would like to thank you for your contribution to the bottom line of the United States.’”
I’m gonna LMAO in a couple of years when we start reading MSM stories about how these Canadian house hunters got Canucked on their Florida real estate investments.
The Canadians aren’t used to dealing with banana republic legal systems like ours has become.
Yeah. We’ve been separating fools from their money for almost a hundred years down here. Doesn’t anyone read about the history of this state? We ran out of American marks just in time for Florida real estate stupidity to go global.
“Judy Lutes, president of the Arizona Winter Visitors Association, a group that provides services to snowbirds, said the Boomers have a distinct difference in taste from their parents’ generation, preferring resort-style living over the close-knit RV parks.”
“‘Shuffleboard and stuff–that doesn’t impress them,’ Lutes said of the Boomers. ‘They’re into homes and condos.’”
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No one is giving thought to the more important question, which has nothing to do with the Boomers or their parents. What will generations subsequent to the Boomers be able to afford? My guess is that they will not be retiring and that, even if they do, they will be too broke to even choose the RV option.
“What will generations subsequent to the Boomers be able to afford?”
Monthly payment to Chinese landlords for housing in the low-rent district
“Qiu Zhenhai, a commentator on Hong Kong-based Phoenix TV, a station with close ties to Beijing, tweeted on Sina Weibo: ‘The housing price problem has torn Chinese society into two pieces. One half is the homeowner group and the other is the non-owning group. The former not only wishes that the housing price will not drop, but also wishes it to rise steadily. The latter not only wishes the housing price will drop, but wishes that it drop sharply … The latter aren’t very influential, but they do have the energy to riot.’”
With a lot more home owners, Chinese society could start to resemble U.S. society.
“It’s part of a broader bipartisan proposal, the VISIT-USA Act, that is working its way with uncharacteristic speed through the U.S. Senate and House of Representatives. It’s aimed at kickstarting the decimated housing market by offering foreigners a three-year residential visa if they invest at least $500,000 in real estate. A least half that has to be on a home where they plan to live at least six months of the year.”
Our Congress hard at work, selling America to foreigners, piece by piece…