In The Past, Money Would Pour Into Your Pocket
Xinhua reports from China. “Puzzled Chinese property developers have a string of questions. No specific control or fine-tuning policies were mentioned in the government work report, which outlined this year’s reform priorities at the just-concluded annual parliamentary session. But the sweeping agenda touched upon financial, taxation and land reforms, all of which are set to impact the real estate market. ‘In the past decade, you just invested, built houses and the money would pour into your pocket. But now I feel pressure, not sure of the prospects,’ a property developer from southwest China’s Chongqing Municipality said.”
Want China Times. “After last year’s frenzy, China’s realty market is undergoing a period of consolidation. A conspicuous high-risk zone is the city of Changzhou in eastern China’s Jiangsu province, which has seen large amount of completed but unoccupied residences in the last two years that has seen the city attain the unwanted label as one of 12 major ‘ghost cities’ in the country. The developer of one housing project in Changzhou is pushing its houses at a 40% discount, to the great discontent of those who bought properties earlier at full price.”
The Australian Financial Review. “On a recent trip to China, an Australian fund manager said his biggest insight was gleaned from two photographs he had stored on his mobile phone. They were taken from his hotel room in the western city of Kunming. In the first photograph, a sea of apartment blocks can be seen surrounding the hotel. The second is the same view taken at night but the buildings are hard to make out because there are barely any lights on.”
“Chinese officials are said to be frantically selling off their mansions and holiday homes at low prices following the government’s declaration of plans to build a national housing information network, reports the Chinese-language Beijing Morning Post. A real estate agent in Beijing’s Haidian district told the Beijing Morning Post that since the announcement there has been an influx of officials looking to “dump” their properties at several million yuan below market value. ‘Some corrupt officials fear that once their property ownership is made public they will come to the attention of anti-graft authorities and be forced to explain the source of their immense wealth,’ said Ren Jianming, a professor at the School of Public Administration at the Beijing University of Aeronautics and Astronautics.”
“An agent told the paper that an exclusive luxury housing development in Guangzhou had sold for just 2,000 yuan (US$320) per square meter about 10 years ago to government officials with ’special connections.’ The value of the properties have since risen to more than 40,000 yuan (US$6,400) per square meter.”
From NTD TV. “Days ago, several Chinese major state-owned banks found “a new trick” to handle their bad loans. They are selling distressed debts to their subsidiary investment banks. By doing this, those banks not only make their accounting books look better, but also reduce their losses significantly. Xie Tian, Professor at University of South Carolina Aiken School of Business commented that, now that the Chinese Communist Party’s banks are still deceiving Chinese investors by selling bad debts to investment units, China’s financial problems are visibly worse. However, no matter what strategy the party uses, it can hardly escape the bursting of all its assets in the end.”
“Xie Tian: ‘On one hand, distressed debts may result from economic decline, overcapacity and shrinking markets. On the other hand, many bad debts are largely due to corrupt officials. If the Chinese Communist Party simply tries to fill the hole without solving that problem, the hole can only become even bigger. More money will be embezzled, and essentially the situation is the same as always: the party’s interest groups plunder money from all Chinese civilians in disguised forms.’”
From Money Week. “For anyone new to the China story, here’s a quick summary of the state of play. When the global financial crisis hit in 2008, global trade dried up. That could have scuppered China’s economy, which relied on selling cheap stuff to the rest of the world. With demand drying up, banks were ordered to lend money hand over fist. Infrastructure deals and property projects were funded left, right and centre, with no real care for whether they could pay for themselves or not. The country is now dealing with the fallout from that.”
“The FT this morning looks at China’s banking system, and the threat from falling property prices in particular. The most insightful line in the piece comes from a ‘prominent Hong Kong credit investor’. He highlights one key fact: yes, the government might have the capacity to bail everyone out. But will it necessarily want to? ‘We have become too accustomed to bailouts. Everyone focuses on the government’s ability, not its willingness, for bailouts. We are all too complacent.’”
“What I like about this line is that he’s summed up not just China’s problem, but the whole world’s problem.”
They are selling distressed debts to their subsidiary investment banks. By doing this, those banks not only make their accounting books look better, but also reduce their losses significantly. Xie Tian, Professor at University of South Carolina Aiken School of Business commented that, now that the Chinese Communist Party’s banks are still deceiving Chinese investors by selling bad debts to investment units, China’s financial problems are visibly worse. However, no matter what strategy the party uses, it can hardly escape the bursting of all its assets in the end.”
Exactly what’s been going on in the US.
“Xie Tian: ‘On one hand, distressed debts may result from economic decline, overcapacity and shrinking markets. On the other hand, many bad debts are largely due to corrupt officials. If the Chinese Communist Party simply tries to fill the hole without solving that problem, the hole can only become even bigger. More money will be embezzled, and essentially the situation is the same as always: the party’s interest groups plunder money from all Chinese civilians in disguised forms.’”
Exactly what’s been going on in the US.
Yeah but its always the party that I don’t endorse doing the plundering. It’s THEM, not US!
from the NTD article:
“Xie Tian, Professor at University of South Carolina Aiken School of Business: “In a regular financial system, there is strict division between normal banks and investment banks. You cannot use money from saving accounts for investment, buying stocks or other public funds. Money for Investment is not protected by federal insurance for savings.”
I guess the US Federal Reserve didn’t get this memo!
Glass and Steagall did.
LOL. You are arguing “settled political debates”!
Subprime never went away. Its not really news but its helpful to understand that weak hands are the only market participants and its been that way since 2007. And you know what that means.
https://www.nasafcu.com/mortgagecenter/
Go ahead and click the link. 30 year money, 0 down, 0 PMI.
“*Special loan programs offered to well-qualified applicants. Some restrictions may apply. Offers valid for primary residences in MD, PA, VA, DC only. ”
Well-qualified –> you better have ALOT of income.
No PMI –> we don’t care, because MD, PA, VA, and DC are ALL recourse states and if the house is underwater we can take your stuff.
There would still be PMI on a low downpayment mortgage.
You’re underwater until you have over 10% equity.
And it’s been available in MD and DC for quite a few years.
Imagine that.
DC paid inbound dwellers a fed 5 k tax credit started in mid 90s
ended 2012
“What this boils down to is that – thanks primarily to the ongoing actions of the Federal Reserve across the career of most of today’s active investors – investors believe that default risk has been abolished. If things go pear-shaped, an ever-forgiving central bank will step in to bail everyone out.
“So in the desperate hunt for returns, they’ll lend money to just about anyone on any terms, as long as they can eke a half-decent yield out of it.”
And this chasing of return no matter what the risk hoses up the risk/return ratio but fund managers will do it anyway because …
THEY HAVE NO OTHER CHOICE.
If fund managers do not get decent returns (after subtracting some hefty fees) that will enable them to attract investor’s money then investors will take their money out of their funds and the fund manager’s fees will then go to zero.
So chasing yields is what they are doing - using, of course, somebody else’s money.
‘China’s top producing coal province of Inner Mongolia, where Ordos is located, is in crisis. Tumbling prices, caused by weaker demand due to slowing growth in China and a flood of cheaper imports, have forced many smaller miners out of business, while some major firms are slashing wages by up to 50 percent to stem heavy losses.’
‘While the fire sale of luxury cars and homes was a common way for coal bosses to raise cash last year in Inner Mongolia, the near year-long price slump has forced some shadow lenders to seize mines after owners defaulted on payments.’
“Some companies pledged their mines to us as collateral. After owing us payments for months, we have no choice but to take over the mines to try to recover our money,” said an official at a Chinese trust company who declined to be identified due to worries about bad publicity. “With such a dire market outlook, who knows if we can even get our money back?”
Poof.
“Aaaaaaaaaand its gone… Please step aside, Sir! This line is only for people who have money in our bank!”
Tumbling prices, caused by weaker demand due to slowing growth in China and a flood of cheaper imports
Where is the cheap coal coming from?
‘Two years ago, many domestic and international economic experts, began describing how China’s property market bubble would soon burst. However, during the recent two years, the property price was still climbing. So how has the bubble managed to remain so robust and only just started to give signs of bursting?’
‘Beijing CCTV financial commentator Mr Niu Dao: “China is a dictatorship country. When the property field experiences serious problems, the Central Bank and the Government will mobilize all means to secure the property price. They don’t follow the market law. Each time when the property market is prepared to make an adjustment, the government then goes and increases the monetary supply and loans. People know the government secretly protects the bubble, so they all rush into the center of the bubble. Now however, the government can not secure the bubble. US Dollars are also fleeing the country and this triggers the impossibility of securing the bubble.”
‘Beijing CCTV financial commentator Mr Niu Dao: “China is a dictatorship country. When the property field experiences serious problems, the Central Bank and the Government will mobilize all means to secure the property price. They don’t follow the market law. Each time when the property market is prepared to make an adjustment, the government then goes and increases the monetary supply and loans. People know the government secretly protects the bubble, so they all rush into the center of the bubble. Now however, the government can not secure the bubble. US Dollars are also fleeing the country and this triggers the impossibility of securing the bubble.”
Once again… Sounds just like the US.
I like the phrase “mobilize all means”. Mobilize To Monetize…… It’s what the FedRes does best.
When the property field experiences serious problems, the Central Bank and the Government will mobilize all means to secure the property price.
Good thing we would never do that.
“the government then goes and increases the monetary supply and…protects the bubble…Now however, the government can not secure the bubble.”
Seems to indicate that there is some kind of limit to how long “government” can dictate a bubble market. Must be unintended consequences to credit expansion, even if delayed.
China’s Minsky moment at hand?
‘Liao Qiang, China banks analyst with rating agency Standard & Poor’s…expressed concern that banks were using write-offs to keep their non-performing loan (NPL) ratios artificially low.’
‘This has been particularly the case with midsized lenders, which bore the brunt of a cash crunch last June when interbank borrowing rates spiked to double digit levels. Minsheng Bank, which reported its 2013 results on Sunday, said its bad-loan ratio rose to a mere 0.85 per cent last year from 0.76 per cent in 2012. But had it not been for aggressive write-offs and transfers of bad debt to third parties, Minsheng’s underlying NPL formation rate would have been 135 per cent higher, according to analysts at Citi.’
‘Regulators have recently relaxed write-off rules to make it easier for banks to strip out bad debts, allowing them to free up space on their balance sheets to absorb a fresh wave of defaults.’
Why don’t they just sell all their bad loans to their central bank?
Or to the Fed, for that matter?
Here’s some globalist toady crap - check out the photo at the top:
‘As export-hungry Europeans have feted president Xi Jinping on his imperial progress across the continent over the last week, how many have realised just how extraordinary is the political experiment he is leading back home? In essence, he is trying to turn China into an advanced economy and three-dimensional superpower, drawing on the energies of capitalism, patriotism and Chinese traditions, yet all still under the control of what remains, at its core, a Leninist party-state. He may be a Chinese emperor but he is also a Leninist emperor. This is the most surprising and important political experiment on the face of the earth. No one in the 20th century expected it. No one in the 21st will be unaffected by its success or failure.’
I thought this was funny:
‘But, you may exclaim, Beijing in 2014 is light years away from Moscow in 1974, let alone 1934! Of course you are right. For every bit of the old there is a byte of the new. In Beijing or Shanghai, you wander through glitzy shopping malls to meet super-smart, sophisticated business people, journalists, thinktankers and academics who talk freely about almost everything. Executives and internet millionaires speak Californian.’
As export-hungry Europeans
Why do we seem to be the only nation unconcerned about exports and trade deficits?
I suspect that when the USD ceases to be the world’s reserve currency that we will suddenly become “export hungry” too.
“check out the photo”
Three peas in a pod, aren’t they?
“Days ago, several Chinese major state-owned banks found “a new trick” to handle their bad loans. They are selling distressed debts to their subsidiary investment banks. By doing this, those banks not only make their accounting books look better, but also reduce their losses significantly. Xie Tian, Professor at University of South Carolina Aiken School of Business commented that, now that the Chinese Communist Party’s banks are still deceiving Chinese investors by selling bad debts to investment units, China’s financial problems are visibly worse. However, no matter what strategy the party uses, it can hardly escape the bursting of all its assets in the end.”
Didn’t Enron innovate this ‘reshuffling the deck chairs on the Titanic’ business model?
“Days ago, several Chinese major state-owned banks found “a new trick” to handle their bad loans.
Weird.
If true, the situation in China has raced through years of what played out in the US in a matter of months. It would suggest that prices have been falling for some time as well, not just the recent past in 3rd and 4th tier cities.
‘Residential housing transactions in Beijing showed a drastic decline of over 60 percent in the first quarter, data from a real estate agency showed, but analysts noted that despite the dismal transaction data, the housing sector will remain stable this year.’
‘Around 40,000 units of residential housing were sold as of Tuesday this year, down an alarming 65 percent compared with the same period in 2013, newspaper Beijing Business Today reported Friday, citing data from real estate agency Homelink.’
‘Earlier this month, a residential project of leading developer China Vanke in Beijing was put on sale at a price at least 3,000 yuan ($483) lower than market expectations.’
I assume that last number is per square foot. I posted an article a few months ago that reported 3 million vacant housing units in Beijing alone, based on electric usage.
When they hit that brick wall, pieces of wreckage are going to come down all over the world. It will be spectacular.
‘We have become too accustomed to bailouts. Everyone focuses on the government’s ability, not its willingness, for bailouts. We are all too complacent.’
Is China turning into America?
We have exported this credit mania to the entire globe.
No, the whole world is.
‘One of China’s 2 major meltdowns in the solar panel sector has taken a big step forward with word that trading in shares of LDK Solar (NYSE: LDK) has been suspended and the de-listing process formally begun as the company liquidates. Meantime, word of a missed interest payment by a building materials maker is sending the latest signal that China will let more companies in ailing sectors default on their debt rather than pay off their creditors.’
‘The latest reports say that closely held building materials maker Xuzhou Zhongsen failed to make a 180 million yuan ($29 million) payment on some high-yield bonds that was due on March 28.’
‘That particular story is related to the real estate sector, which is gearing up for its own much-needed correction following a housing bubble that has seen property prices soar to ridiculous levels over the last decade. But the more important message is that Beijing will let ailing companies default on their debt, and make investors more responsible for losses when they buy risky bonds.’
‘Los Angeles County lost more net jobs than any large metropolitan area in the nation between 1990 and 2013, due to its high cost of living, unfriendly business climate and poorly educated workforce, a new UCLA report concludes.’
“To put this in perspective, L.A. has gone 23 years without positive job growth,” wrote economist William Yu in the annual forecast of UCLA’s Anderson School of Management, released today.’
‘The county experienced a 3.1 percent decline over the period. Only two of the nation’s 32 largest cities shrank their workforces during that time: Cleveland (-0.2 percent) and Detroit (-2.8 percent).’
‘The report noted that housing in Los Angeles and San Francisco is the least affordable among the nation’s major cities, according to a National Association of Realtors index. One example: a median single-family house in Los Angeles costs $531,000, in contrast to $220,000 in Phoenix.’
“For an employer considering expanding or establishing a business,” Yu wrote, “it is less likely that she will choose L.A. because it will cost her more in rent and wages compared to other cities with lower costs of living but not necessarily lower quality amenities.”
The entire state of CA is an impoverished $hithole.
“California Most Impoverish State In The US”
http://en.wikipedia.org/wiki/List_of_U.S._states_by_poverty_rate
(geography adjusted)
DC actually tops the list but that particular nest of corruption isn’t a state…. thank God.
N. Bethesda, MD (DC metro) Housing Prices Crater 45% YoY; Inventory Doubles
http://www.movoto.com/north-bethesda-md/market-trends/
Gaithersburg, MD Housing Prices Sink 9%; Inventory Skyrockets 88%
http://www.movoto.com/gaithersburg-md/market-trends/
Burke, VA(DC metro) Housing Prices Crumble 24%; Inventory Skyrockets 83%
http://www.movoto.com/burke-va/market-trends/
Sterling, VA Housing Prices Slide Lower 11% YoY; Inventory Billows 72%
http://www.movoto.com/sterling-va/market-trends/
I’m thinking of having a house built instead of buying one, has HA ever listed his company’s name or contact info? I want a 4,000 sq. ft house for $200k.
Still self-flagellating eh donkey?
Does sound like a pretty sweet deal. I may lose a bit on it, but nothing like market price.
HA, call me. We might be able to do some business.
House prices cool, sales plummet
2014-04-02 14:01 China Daily
The cost of homes in major cities continues to rise, but the growth rate may slow
Zheng Peng, a 28-year-old company executive in Beijing, is sitting on pins and needles these days. Any news about home prices makes him nervous.
He bought a one-bedroom apartment outside Beijing’s North Fifth Ring Road in early March - a time of the year when buyers can usually get a good bargain. But this year, things are a bit different. After Zheng made his purchase, an increasing number of reports said China’s real estate market was showing signs of cooling.
“I really hate these media reports that always have one-sided views,” said Zheng. “Do you think home prices really will fall?”
Facts speak louder than words. According to the National Bureau of Statistics, new home prices in 57 cities out of 70 major cities across the country saw an increase month-on-month in February. The number of cities experiencing such growth reached a record low in the past 13 consecutive months - and the growth rate has been shrinking.
Moreover, the number of home sales is plummeting. According to Century 21, a major real estate brokerage firm, the number of transactions in the pre-owned home market in most of China’s major cities, including Beijing and Shanghai, all saw a drop of more than 50 percent year-on-year in the first quarter.
Beijing, for instance, posted a 65 percent sales decline in the pre-owned home market and a 44 percent fall in the new home market in the first three months of this year. The situation in Shanghai was similar, with transactions decreasing 56 percent in the pre-owned home market and 40 percent in the new home market, both reaching record lows in the past five consecutive months, statistics from Century 21 showed.
“The market performance of the second quarter really matters,” said Sang Yufeng, director of the development center of Century 21. “If property transactions stabilize and pick up in the second quarter, then the sluggish home sales in the first three months is just a short-term adjustment. Otherwise the pessimistic sentiment could persist throughout the whole of 2014.”
…