Sounds Of Collapse
The Property Report looks at Honk Kong. “As Hong Kong’s high-end property market continue to struggle due to government cooling measures and surging constructions costs, developers are luring first-time, middle class buyers with lower rates and immediate move-in schemes. Sun Hung Kai, one of the mass-market Hong Kong developers facing fiercer competition next year when new housing stock reaches its highest level in eight years, is implementing an uncommon ‘move-in, pay-later’ tactic, offering buyers up to 540 days to make their initial payment.”
“Another firm, Henderson Land Development, has launched new homes starting at HKD6 million (USD773,000), which is considered very reasonably priced, and gave up to 28 percent discounts in one project. Property prices have increased by about 120 percent since 2008 in Hong Kong—one of the most expensive markets in the world—and buyers are on the lookout for more affordable investments, forcing developers to give discounted rates to meet sales projections at the cost of lower profits, according to Reuters.”
From Focus Taiwan. “At the base of social concerns today are a lack of confidence in the economy and a pessimism about the future. The first step to resolving public discontent is making the notion of ‘housing justice’ a reality. The numbers show it all. The house price-to-income ratio for all of Taiwan has shot up since the financial crisis, from 7.1 in 2007 to 9.2 in the third quarter of 2013. In Taipei, it’s significantly more severe; New Taipei City’s ratio leapt from 7.1 to 11.4, while Taipei City’s skyrocketed from 8.6 to 14.7.”
“A local magazine broke the numbers down further based on figures from 2012. The average dual-income family in Taiwan would have to put their entire salaries aside for 35 years to buy a home in the capital, where a 40-ping (132 square meters) home goes for around NT$35 million (US$1.16 million). For couples on Taipei salaries, it’s marginally better: they only have to stop eating, drinking, and spending on anything else for 27.5 years to buy a home.”
Gulf News on China. “Real estate investors felt deeply insecure and murmured their protest when a bunch of developers, this week, offered heavy price discounts to new buyers in the wealthy Zheijiang province of East China. Under pressure of severe oversupply and high inventory, developers in smaller cities of China have begun discounting home prices, triggering instant panic at the stock market.”
“All big property developers of Hangzhou joined the price war, slashing anywhere between 2000-4000 yuan per square metre. In Changzhou city in neighbouring Jiangsu province, a developer announced a 40-percent discount last week. Real estate inventory in cities like Hangzhou had reached a whopping 113,000 units by the end of 2013, and the problem is similar in many second- and third-tier cities.”
“Irrational fears gripping the stock market over a cooling property sector are exaggerated. China’s property market might have outgrown its boom days, but fears of imminent bubble burst and economic crash are premature.”
Want China Times. “The city of Hangzhou in eastern China’s Zhejiang province may follow in the footsteps of neighboring Wenzhou to see a downturn in the housing market after several developers cut prices of units in residential projects at the beginning of the year, reports Guangzhou’s 21st Century Business Herald. The price cut announced for two residential projects in Hangzhou on Feb. 18 and 19 shocked the local property market, with its impact being felt across China, the paper said.”
“The number of new houses is expected to surge further since over 100 new projects are set to hit the market later this year, offering more than 100,000 new units. Meanwhile, local realtors estimate that over 100,000 previously owned houses are available in the market, another record high. The mounting inventory is a result of the local government’s massive sale of land use rights, the paper said.”
New Tang Dynasty on China. “CCTV financial commentator: ‘I went to some counties and cities in Yangtze River Delta, including Hangzhou, Yiwu, and Jinhua. The property market is really poor, they are not wanted. The second-hand property market is a mess too.’”
“It is understood that after the Chinese New Year, DeXin-Beihai park real estate in north Hangzhou city cut prices by 3,200 yuan. A nearby estate in Tianhong Champs had a 3,400 yuan cut. Subsequently, eight more properties in Hangzhou made various price adjustments. Yang Bin, economist: ‘In fact, a 50 percent price cut is still a bubble. People cannot afford it. Average housing prices are still the highest in the world, higher than even New York.’”
“China’s currency - the Yuan, also called the Renminbi - hit a historical low of 6.04 against the dollar last month. In just ten business days, the Yuan has dropped by more than 2 percent against one US dollar, noting that China’s currency only rose by 2.9 percent during the whole year of 2013. The New York-based Goldman Sachs Group released a report on Feb 21. The report said, ‘Ghost towns, local debts and trust sector crisis’ caused the slump in Yuan.”
“There were even recent reports saying over 60% of housing prices in Shanghai had dropped. The discounts reached 10% in some places, a level far beyond that in 2013. Some people said they had heard ’sounds of collapse’ in China’s housing market.”
“Xie Tian, Professor at Aiken Business School, University of South Carolina: ‘In fact we know that a large fraction of that hot money is from the CCP itself. The party bigwigs circulate their money bank to China.’ Xie Tian said, China’s housing bubble will definitely burst in a long-term view. Once that occurs, a consequent huge slump in the Yuan is unavoidable. Xie Tian commented that the CCP took power with lies and violence back in history and now tries to maintain its regime with the same means. Therefore, it can hardly keep its governance once losing control over the financial market, currency and land trade.”
The Financial Review on China. “In a dusty valley in central China at the end of a winding dirt track, 20 half-finished apartment blocks rise up from the mud. Chinese characters etched into the mountainside proclaim this isolated 10 billion yuan ($1.8 billion) development project will ‘change the world.’ And just 12 months ago, teams of workers toiled around the clock to create the new metropolis, fortified by giant slogans urging them to ‘bleed, sweat but don’t cry.’ Now a single builder is left at the desolate site. He tells AFR Weekend that construction should have been finished more than a year ago but the money has dried up and all 800 workers left in search of a paying job.”
“This abandoned and eerie construction site is ground zero for China’s fast-growing ’shadow banking’ system. It is one of the biggest risks lurking in the global economy. ‘This is no different from the sub-prime crisis [in the US],’ says David Cui, who has published extensive research on the issue for Bank of America Merrill Lynch. Except that in China, it is highly leveraged companies rather than households causing the problem.”
“In keeping with the US sub-prime mortgage crisis analogy, Liulin is the equivalent of Florida or Las Vegas – a vulnerable pocket where the bad loans start and potentially spread to the rest of the country. The town’s fortunes reversed in line with the national steel industry and, unfortunately, it happened just when all of the debts became due. Cash flow problems are on display everywhere in Liulin.”
“One former coal truck driver says that during the town’s heyday he was paid up to $1800 a month, but he quit last year to work for a taxi company when his salary dwindled to less than $450. To emphasise his point, he drives past an empty loading dock which, he says, used to be crowded with trucks at this time in the morning, just two years ago. In a worrying sign for the town, the driver says that among the local miners, Liangsheng is not in the worst shape. Workers at a nearby mine owned by Hongsheng Energy Group claim they haven’t been paid in eight months.”
“Sooner rather than later there will be a default, says Cui. At first, the market won’t be too worried about contagion, but then ‘there will be more and more defaults which chip away at confidence,’ he says. ‘At a certain point, something happens and people lose confidence and then we have a credit crunch in the system.’”
“Real estate investors felt deeply insecure and murmured their protest when a bunch of developers, this week, offered heavy price discounts to new buyers in the wealthy Zheijiang province of East China. Under pressure of severe oversupply and high inventory, developers in smaller cities of China have begun discounting home prices, triggering instant panic at the stock market.”
Investors in Chinese real estate have nothing whatsoever to fear. Like California real estate, China real estate always goes up.
“Irrational fears gripping the stock market over a cooling property sector are exaggerated. China’s property market might have outgrown its boom days, but fears of imminent bubble burst and economic crash are premature.”
That’s the idea!
Boy, where have we heard that before? In fact, a few of the concepts in that article mashup resounded of the USA in 2006-7. Developers trying special financing and offers of no payments to shoehorn a few more borrowers into their properties. Ghost cities, as well.
Is it too late to short Chinese home builders for the long run? Is there such a thing as a leap put there?
Have the Chinese equity locusts abandoned your corner of the U.S. real estate market yet?
“The price cut announced for two residential projects in Hangzhou on Feb. 18 and 19 shocked the local property market, with its impact being felt across China, the paper said. The number of new houses is expected to surge further since over 100 new projects are set to hit the market later this year, offering more than 100,000 new units. Meanwhile, local realtors estimate that over 100,000 previously owned houses are available in the market, another record high.”
Massive price cuts on new residential projects, thousands and thousands of new units on the way, plus thousands and thousands of used homes on the market all add up to an epic bust.
“This abandoned and eerie construction site is ground zero for China’s fast-growing ’shadow banking’ system. It is one of the biggest risks lurking in the global economy. ‘This is no different from the sub-prime crisis [in the US],’ says David Cui, who has published extensive research on the issue for Bank of America Merrill Lynch. Except that in China, it is highly leveraged companies rather than households causing the problem.”
Wait a minute…is he suggesting the likes of New Century, Ameriquest, Washington Mutual, Wachovia, Countrywide, Fannie Mae, Freddie Mac, Lehman Brothers etc. were not companies, or that they were not highly leveraged?
‘it is highly leveraged companies rather than households causing the problem’
This is what I sense the main problem is as well, probably because they haven’t sold the housing to individuals in many cases.
Wbbr reported this morning that a pimpco hack stated Canada housing will begin cratering very soon.
‘It became more affordable for Manitobans to own homes in final quarter of 2013, according to a new report from RBC. A surge in listings for single detached homes provided more choice for homebuyers, driving prices lower and improving affordability in the process, the report states.’
“Sounds Of Collapse”
It goes like this;
KEEEEEEEEEEEEEEYRAAAAAAAAAAAAAAAAAAAAAAAAAAAAAASH!
Another blurb from WBBR this morning;
the auto sales numbers are founded on sub-prime lending
Need a lightly used set a wheels? Sit tight because theres gonna be a herd of them.
These will be more fuel efficient than the last herd as well.
This is good. I’m lookin’ to get a couple year old Honda at wholesale!!
you can refi a used car loan ! this and cash fo clunkers” has made used car pricing bizareeeeeeeee
Bizarre…. another word for price fixing in this case.
Thank our ‘friends’ at FedRes.
You can also finance a used vehicle for more than the high Kelley Blue Book price. We are still in the days of ridiculously loose credit.
Need a lightly used set a wheels? Sit tight because theres gonna be a herd of them.
Last time they thought there would be a glut of them, they freaking CRUSHED perfectly good vehicles…
Grrrr. The broken-window economics-believing idiots really grind my gears.
And when was this?
You really don’t remember Cash for Clunkers?
That travesty took place in the summer of 2009.
‘a 50 percent price cut is still a bubble. People cannot afford it. Average housing prices are still the highest in the world, higher than even New York’
‘The average dual-income family in Taiwan would have to put their entire salaries aside for 35 years to buy a home in the capital…For couples on Taipei salaries, it’s marginally better: they only have to stop eating, drinking, and spending on anything else for 27.5 years to buy a home’
Hmm. I’m starting to wonder if Bernanke’s plan to have high house prices support the economy might have it’s limits.
“‘The average dual-income family in Taiwan would have to put their entire salaries aside for 35 years to buy a home in the capital…For couples on Taipei salaries, it’s marginally better: they only have to stop eating, drinking, and spending on anything else for 27.5 years to buy a home’”
This says it all. Was the easy money worth it, Greenspan and Bernanke? Are you happy now, you clowns?
Saturday Night Live had a skit that was a parody of “Who Wants To Be A Millionaire?” (when it was new) called “Who Wants To Eat?” with contestants from impoverished nations. IIRC the final question to some woman from Serbia concerned “anorexia” and she could not understand the concept.
Alexandria, VA Housing Prices Crater 8%; Excess Inventory Balloons 39%
http://www.movoto.com/alexandria-va/market-trends/
Another overlevered Donkeeee.
http://im.rediff.com/news/2012/jun/20load10.jpg
HEEHAW
Looks like the donkey is having the last laugh!
‘Tourism drives Chiang Mai property boom Nearness to China, infrastructure improvements and the promise of Asean integration set the stage for a prosperous market.’
‘The property boom began in late 2011 when Thailand suffered heavy flooding, particularly in Bangkok. Residential demand turned to provinces, particularly major ones where facilities are good and developments are planned.’
“Chiang Mai attracts both Chinese tourists as a second home and Chinese investors who see strong potential from Asean integration,” Mr Somchao said.’
‘Matthew Lin, managing director of Chiang Mai-based property developer Summit Global Developments, said prices of land plots behind Central Festival Chiang Mai skyrocketed five-fold in two years from 3 million to 15 million baht per rai. Over the same period, land prices in the business park doubled to 20 million baht per rai. “Increases in land prices are driven by landowners, not demand,” Mr Lin said. “They are the second-generation landowners who think land prices should be raised like that.”
‘Political unrest and an over-supplied $20 billion real estate market in Thailand are the latest challenges threatening developers who are cancelling new launches in the hopes of staving off a bubble.’
‘High household debt and a rising rejection rate due to stricter loan regulations have also deterred homebuyers, especially in Bangkok.’
‘Home loans are already slowing, potentially weakening earnings of major banks like Siam Commercial Bank and Kasikornbank.
“We aim to lend 52 billion baht ($1.60 billion) for housing this year, or on average 3-4 billion baht a month,” said Chatchai Payuhanaveechai, executive vice president at Kasikornbank. “In January, we lent less than 1.5 billion baht. That showed a 50 percent reduction from our target.”
Google Translate English/Mandarin: punch in “crazy buyer”
& get
疯狂的买家
Pinyin: Fēngkuáng de mǎi jiā
which starts out sounding like “FB”
‘The mixed performance of Australia’s major cities, including a 2 per cent slide in Brisbane prices, resulted in a flat result overall for capital city home prices in February, according to the widely-watched RP Data - Rismark index.’
“The likelihood is that the weak reading for February is an adjustment from the strong readings in December and January rather than the beginning of a flat to negative growth phase across the macro level housing market,” noted RP Data’s research director Tim Lawless.’
‘However, he does expect the housing market to lose traction later in the year, due to a lack of affordability and growing wariness of rising interest rates. “Our view is that housing market conditions will start to wind down later this year as affordability constraints and low rental yields dampen market conditions,” Mr Lawless added. “Additionally, with a belief that mortgage rates are likely to start tightening later this year, it may help to quell some of the exuberance we have been seeing.”
Back at home:
‘Some Americans caught in the weak job market are lining up for federal student aid, not for education that boosts their employment prospects but for the chance to take out low-cost loans, sometimes with little intention of getting a degree.’
Take Ray Selent, a 30-year-old former retail clerk in Fort Lauderdale, Fla, was unemployed in 2012 when he enrolled as a part-time student at Broward County’s community college. That allowed him to borrow thousands of dollars to pay rent to his mother, cover his cellphone bill and catch the occasional movie.’
“The only way I feel I can survive financially is by going back to school and putting myself in more student debt,” says Mr. Selent, who has since added $8,000 in student debt from living expenses. Returning to school also gave Mr. Selent a reprieve on the $400 a month he owed from previous student debt because the federal government doesn’t require payments while borrowers are in school.’
‘The Education Department’s inspector general warned last month that the rise of online education has led more students to borrow excessively for personal expenses. Its report said that among online programs at eight universities and colleges, non-education expenses such as rent, transportation and “miscellaneous” items made up more than half the costs covered by student aid.’
‘The report also found the schools disbursed an average of $5,285 in loans each to more than 42,000 students who didn’t log any credits at the time. The report pointed to possible factors such as fraud in addition to cases of people enrolling without serious intentions of getting a degree.’
I wonder how many useless PhDs will come out of this.
the fed gov will hire them 100K+++ plus bennies etc
At age 30?!!?!?! So sad. Where to even start to tell these kids to put on their big boy pants and go to work. I think it’s unfortunate that we appear headed the way of the socialist toilet.
Go to work WHERE? Their future was hacked before they were even born.
Start yer own lawn care business.
^lmao
Or open a restaurant
Yes, and someone asked me two days ago why I wouldn’t back student loan forgiveness. Did you read this Carlos?
Lawrence (fun)Yun is the Barney Fife of economics.
‘U.S. stocks opened lower on Monday, alongside other risk assets, as Ukraine and Russia prepared for war after Russian President Vladimir Putin declared he had the right to invade his neighbor.’
‘Secretary of State John Kerry made the round of Sunday shows this morning to condemn Russia’s “incredible act of aggression” in Ukraine…in the seriousness of the situation, the irony of Kerry’s next comments may have gone missed. ”You just don’t in the 21st century behave in 19th century fashion by invading another country on completely trumped up pretext,” he said.’
‘He went on to repeat the assertion on Meet the Press, keeping a straight face as he told host David Gregory: ”You just don’t invade another country on phony pretext in order to assert your interests.”
So far, not a shot has been fired and there are no fatalities. How does that stack up to Mr. Obama’s drone strikes asserting “our interests”?
From Focus Taiwan. “At the base of social concerns today are a lack of confidence in the economy and a pessimism about the future.
If the Asian Tigers are feeling this way, then we’re boned.
‘Social tensions in China span farmers dispossessed by land seizures, citizens angered by pollution, ethnic divides, and the gap between billionaire entrepreneurs and rural citizens, who last year had an average annual income of 8,896 yuan ($1,448). In the March 1 attack in Kunming, scores of people at a railway station were stabbed in what the local government described as an assault orchestrated by Xinjiang separatist forces, the Xinhua News Agency reported.’
“It’s not really important to set a GDP target, the important thing is to make normal people’s life better,” An Qi, a 21-year-old tour guide, said last week in the city of Yueyang in the central province of Hunan. “Apart from money, there are many other things that are valuable for life, like a good living environment.”
‘Her view contrasted with that of Beijing resident Yan Shuanghu, 57, who said that the economy was growing too slowly. “The National People’s Congress should focus on improving ordinary people’s incomes,” Yan said, snapping stems from green beans as he sat in the midday sun outside his son’s restaurant. “The situation is not good for lower levels of society.”
‘China’s property trusts, grappling with repayments equivalent to the size of Puerto Rico’s economy, face rising default risks as a former central bank adviser dubs real estate the biggest threat to the economy. The trust funds must repay 634 billion yuan ($103 billion) of debt this year, up 50 percent from 2013, according to estimates from Haitong Securities Co., the nation’s second-biggest brokerage.’
‘The real estate market is “the root of all risks” as falling prices erode local governments’ ability to raise funds for spending that helps the economy, Li Daokui, former People’s Bank of China adviser, said Feb. 25. Property shares slid to a 16-month low last week after Industrial Bank Co. suspended a riskier form of financing for developers, adding to concern as 82 of 181 publicly listed builders have more debt than equity.’
“The second wave of defaults may be in property trust products, following the first wave in the coal mining sector,” said David Cui, China strategist at Bank of America Merrill Lynch. “Like the subprime crisis, it’s a problem with leverage. In the U.S., it was the individual who borrowed too much money. In China, it’s the companies which borrowed too much money.”
‘China Calxon Group Co. (000918) said its board had approved scrapping a planned note offering because of “the change in the onshore bond market,” according to a Feb. 20 statement. The Hangzhou-based builder of high-end apartments has a debt-to-equity ratio of 276 percent. Myhome Real Estate’s debt was 119 percent of equity as of the third quarter of last year, up from 92 percent a year before that.’
“Property companies’ leverage is too high,” said Shi Lei, head of fixed-income research in Beijing at Ping An Securities Co., a unit of the nation’s second-biggest insurance company. “When liquidity turns tight, the problems are exposed.”
In China, companies can declare bankruptcy. I assume the guy whose company borrows three times what they build pays himself a very nice salary. For the individual, bankruptcy resolution involves jumping off a bridge, or in some stories I’ve heard, having your family jailed.
You make it sound like bankruptcy is an easy option for companies. I seem to recall stories right here on this blog of Chinese companies who did not have the money to pay employees, and when they tried to lay them off and shut their doors due to a lack of cash (bankrupt), the government told them they were not allowed to shut down. The owners then disappeared, either running away from the government or missing due to them.
The owners then disappeared, either running away from the government or missing due to them.
Another possibility is that the owners were “parted out”
Glendale, CA Housing Prices Dive 6%; Excess Inventory Rises 39%
http://www.movoto.com/glendale-ca/market-trends/
Thousand Oaks, CA Housing Prices Crater 33% YoY And Falling
http://www.movoto.com/thousand-oaks-ca/market-trends/
Oxnard, CA Housing Prices Slammed Hard; Down 43% YoY
http://www.movoto.com/oxnard-ca/market-trends/
Asian crisis of 1998 vs us/eu 2008
Asians went back to work w lower wages and prices like usa 1920-21
we awarded ourselves free phones- living w parents- hiding in grad school-and 99 weeks of watching tv
I’m pretty sure that most of the unemployed would have a preferred a full time job to the $220 a week or whatever they got for unemployment. As for the kids “hiding” in grad school, other than working P/T in retail, few of them have employment options.
Its not like jobs are going begging. I’m interviewing with Intel (anyone have stories regarding them?) and I’m having the pleasure of running the gauntlet again. Based on the interview process so far they are being VERY picky about who they hire and they have plenty of skilled candidates to choose from. I also know that if I was unemployed right now or had employment gaps on my resume that I wouldn’t stand a chance, I would be considered damaged goods.
good luck- small co startup might be better.
I just inherited a house in Victorville, CA that my
wife and I have to share with my brother-in-law. I
think I better get it listed ASAP. The realtor says we
can sell it for 165,000. To get that kind of money for
a house in that nasty city seems unreal, but I’ll be happy
to cash out with what I can get.
If you list for just slightly under the going rate you can probably get it sold fast, the appraisal will come in OK, the buyers loan will be approved quickly, etc…I did that in spring 2007 (also figured I’d better get it sold ASAP thanks to what I’d read here and on other financial blogs), listed my place at about $10K under the going price (listed it at $315K vs. the 325 my realtor recommended) and had a buyer under contract within a week…$10K sounds like a lot but was only about 3% in my case and as it turned out listing slightly low was a really good move as Bubble 1.0 popped a few months later.
When I was in Victorville on business years ago the Roy Rogers Museum was still there. Bullet was there, stuffed. I had owned one of the offspring (German Shepard) in my youth. Yuk. Dale said she should have stuffed Roy too. She is gone now and so is the museum I hear. Weird place Victorville.
Some one just sent me some links trying to get me to link to them. I clicked on one and found this:
“Fort McMurray, AB T9H 4Y1
$465,000
3 Beds, 2 Bath, 0.19 Acres
LOOKING FOR A LOT TO BUILD A 30X30 GARAGE OR BIGGER WITH ACCESS TO SKI -DOO TRAILES FROM HOME ,WELL HERE IT IS, This bright open concept mobile home in the heart of Gregoire is located on a quite street with 4-6 car parking along with access to the back yard to park campers or build your dream garage.’
http://www.fortmcmurrayrealestate.com/listing/fm0029335-316-grandview-cres-fort-mcmurray-ab-t9h-4y1/
“Call to view this wont last long.”
The world has gone crazy.
Apparently they aren’t making any more wilderness.
‘China’s money-market rate jumped the most in six weeks, rebounding from a nine-month low, as the central bank withdrew excess cash from the financial system. “Today’s repo sale, especially the 28-day contract, suggests the central bank sees the current market liquidity” as being excessive, said Zhou Hao, an economist at Australia & New Zealand Banking Group Ltd. in Shanghai.’
http://www.bloomberg.com/news/2014-03-04/china-money-market-rate-jumps-as-central-bank-drains-excess-cash.html?cmpid=yhoo