July 1, 2014

Developers Are Facing The ‘Guillotine’ In China

The Herald Sun reports on China. “The Communist Party’s flagship newspaper on Monday warned foreign investment banks, speculators and domestic property developers from taking ‘overly pessimistic views’ about the housing market. A commentary in the overseas edition of the People’s Daily warned there were individuals with ‘ulterior motives.’ The purpose of these pessimistic comments is ‘to pressure the government into loosening home purchase restrictions, ease credit and launch other moves to rescue the market so that developers can continue to benefit from high property prices…,’ the commentary said.”

“The overseas edition of the paper also criticized those who hoard apartments–adding that many of those who have been negative publicly are actually trying to buy up property at the market bottom. ‘It is a trick they have been using for years and it’s no longer surprising,’ the paper said.”

The Epoch Times. “Across China, real estate developers are scrambling to get rid of inventory, resorting to unorthodox sales techniques that suggest a deep concern about the future. Li Junheng, an analyst of the Chinese economy with Warren Capital based in New York City, said in a recent newsletter that the ‘biggest cities including Shanghai are seeing price reductions both inside and outside the Inner Ring Road by 2–3 percent and 8–10 percent respectively.’”

“The newsletter also said that the slowing economy has led high-end retailers to stop opening new stores in shopping malls, while major real estate projects are discounting to the tune of 50 percent. Even the ever-confident VIP gamblers who travel to Macau’s casinos have slowed to a trickle. ‘We think that the market dynamics are significantly different from 2008-09 … and 2012 … in that the market is seeing a fundamental and structural surplus and low consumer sentiment,’ she wrote.”

From Bloomberg. “China’s project to build a replica Manhattan is taking shape against a backdrop of vacant office towers and unfinished hotels. The skyscraper-filled skyline of the Conch Bay district in the northern port city of Tianjin has none of a metropolis’s bustle up close, with dirt-covered glass doors and construction on some edifices halted. ‘Investing here won’t be better than throwing money into the water,’ Zhang Zhihe said during a visit to the area last week from neighboring Hebei province to look at potential commercial-property investments. ‘There will be no way out—it will be very difficult to find the next buyer.’”

“The company has 20.7 billion yuan of debt due in 2014, almost triple 2013’s amount. Another 13.9 billion yuan is due next year. Wang Wei, a 34-year-old Tianjin resident, was driving through the area to check out property prices, finding them six times higher than what he’d be willing to pay. ‘I’ve seen a lot of reports about the area, but apparently it’s not a place fit for home—at least for now,’ said Wang. ‘No shops, no schools, no hospitals and no neighbors.’”

The Wall Street Journal. “Suzhou, about an hour’s drive west of Shanghai, is suffering from oversupply in office buildings, especially in the Suzhou Industrial Park, said a survey of 107 respondents conducted in April and early May this year. The report cited an investor’s experience on a recent work visit to the Suzhou Industrial Park. ‘Our host joked that we were welcome to use office space in the same office building for free if we set up a company in Suzhou. There are so many empty office units in the building.’”

“More than two million square meters of office space are scheduled to be completed in the next two years, the report added. For Hangzhou, it’s the lackluster housing market that is pouring cold water on investment appetite. Property developers have introduced substantial price cuts on residential projects, driven by a need to cut down inventory as construction of homes outpaced demand in recent years. Shanghai-listed property developer Poly Real Estate Group recently put up red promotion posters around the city for Charming Land, one of its housing projects in Hangzhou’s suburbs. Poly is offering zero down payments, zero monthly payments and zero interest rates.”

Want China Times. “The government of Hohhot, capital of northern China’s Inner Mongolia autonomous region, has been relaxing its policies on purchases of real estate in an attempt to revitalize a stagnant market, reports the Chinese-language National Business Daily. In the first quarter this year, only 1,944 realty transactions were made in the city, representing a miniscule 0.37% of the total supply. Despite the dismal figures, new construction continues to fatten an already obese inventory.”

“As a less developed second-tier city, Hohhot, with a total population of 3 million and a registered population of 2 million, now has 120,000 unsold houses, said Zhang Dawei, chief analyst at Centaline Property. This guarantees 10 years of consumption, on an average of 1,000 sold a month. The problem is only aggravated by the prospect of 100,000 newly constructed houses during the same window of time.”

From China Daily. “Huang Xiaoyun, general manager of the Shanghai unit of E-house (China) Holdings Ltd, a real estate services company, said the supply-demand gap widened in May, citing figures from the 90 residential projects that he oversees in Shanghai. ‘Prices are still subdued. I’ve never seen developers openly advertising 5 percent price cuts,’ he said. ‘Buyers are also becoming more tough in bargaining. Some buyers are not even keen on property visits, unless the prices are reduced by 5 to 10 percent.’”

“Min Yuansong, co-president of Future Holding Inc, a real estate development and commercial brokerage firm, said that developers are facing acute cash flow problems, as borrowing costs have surged and buyers have to wait several months for mortgages. ‘In some third-or fourth-tier cities, developers are unable to bear the funding pressures,’ Min said.”

From NTD TV. “As of early May, Beijing had an inventory of more than 70,000 new commodity houses, Shanghai 65,987. That was a total of 10.26 million square meters of area, a new record high. Inventory in Shenzhen was also high, more than 50,000. As of early May, Beijing had an inventory of more than 70,000 new commodity houses, Shanghai 65,987. That was a total of 10.26 million square meters of area, a new record high. Inventory in Shenzhen was also high, more than 50,000. Many Chinese property developers achieved less than 30% of their target sales in the first five months.”

“Professor Wang Jianguo of Guanghua School of Management, Peking University, indicates the real estate market is down due to a lack of demand. Wang Jianguo: ‘As I know well, people used to call me and ask if there’s any house for sale. Now, they ask if there’s a need for housing.’”

“Economic commentator Niu Dao predicts the first ‘guillotine’ may take effect this September targeting the first-tier cities. Niu Dao: ‘This bubble is too big. The bubble exists in every city in China. It won’t target one particular city. It is a problem of currency. Too much money printing has ended up in real estate, and brought up the prices of real estate. Now that these funds are fleeing, the property has to be sold. But no one will buy it, because everyone is cutting prices. Now with the yuan down, many people quit the real estate market. Property prices are sure to fall.’”




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64 Comments »

Comment by Blue Skye
2014-07-01 04:56:35

‘There will be no way out—it will be very difficult to find the next buyer.’

The lack of personal bankruptcy protection in China is going to make this a very interesting crash. Sequel to “Escape from New York” on Steroids.

Comment by Albuquerquedan
2014-07-01 05:44:26

Yet the Chinese economy measured by both government and private economists is accelerating not declining. BTW, if prices drop so 25% and someone has put down 50% as a down payment and in many cases the house went up 25% since the purchased, just how does someone go bankrupt?

Comment by Blue Skye
2014-07-01 07:29:35

Let’s say you are a pig farmer and you have an ingot of copper in your barn. You use it as collateral to get a loan to buy a condo in a ghost city. Then you use it again at a different bank to get another loan to buy another condo, and so on. This is how a $25Trillion credit expansion gets going!

Suddenly it dawns on everybody that there is enough speculative housing already built in China to house half the world’s population and the music stops. There is no one to sell these spec units too. Oh snap. Wiped out, worthless and bankrupt. Plus the government comes and cuts your head off for fraud.

You go ahead and hang on the official growth statistics. When that pig hits the wall it’s going to make a mess.

BTW, there are no stories of “accelerating” growth.

Comment by Albuquerquedan
2014-07-01 10:18:49

I posted one today.

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Comment by Blue Skye
2014-07-01 10:59:26

I think I saw that Dan, wasn’t it along the lines that even more government stimulus has given some resumed growth? I didn’t feel the acceleration.

 
Comment by Albuquerquedan
2014-07-01 11:05:11

It was very limited stimulus with a good part of it tax cuts for small businesses. However, the entire budget deficit of China is smaller than the US and the debt is probably less 1/6 the US debt. Once again I know I am Daniel is the lion’s den on this one. However, the bottom line is while China has a housing bubble and it is deflating, China is still far better off than the US and far less likely to implode.

 
Comment by In Colorado
2014-07-01 13:20:17

It was very limited stimulus

I would consider building enough surplus housing for a billion people to be a pretty big stimulus.

 
Comment by Albuquerquedan
2014-07-01 13:45:47

They have a surplus of one billion houses? I have seem estimates running up to 50 or 60 million but that is for a population of 1.3 billion but one billion houses? Can you provide a link?

 
Comment by Albuquerquedan
2014-07-01 13:56:56

Sorry for one billion people o.k. maybe about 500 million houses, but still an order of magnitude greater than the actual surplus.

 
Comment by Blue Skye
2014-07-01 15:48:50

“China has a housing bubble and it is deflating…”

Dan, you’re not making me feel the acceleration. China has built enough housing built for 3.5 billion people, and they are still powering into the tsunami. They only have 1.3 billion people you say? Sounds like more than your casual manageable housing “bubble”.

 
 
Comment by taxpayers
2014-07-01 12:57:35

I love this story of the ingot
I’ll get one today !

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Comment by Raymond K Hessel
 
 
Comment by Guillotine Renovator
2014-07-01 16:12:11

The Chinese are showing up on our shores in droves. It is impossible to ignore.

Comment by Guillotine Renovator
2014-07-01 16:13:19

I’d prefer they go straight back to that hellhole they created.

 
 
Comment by Whac-A-Bubble™
2014-07-01 23:42:11

It’s different investing in China real estate than in California real estate; for one, California real estate always goes up.

 
 
Comment by Combotechie
2014-07-01 05:00:06

From the NDT TV article:

“Too much money printing has ended up in real estate, and brought up the prices of real estate. Now that these funds are fleeing, the property has to be sold. But no one will buy it, because everyone is cutting prices. When the yuan was good, people rushed into real estate expecting prices to go up. Now with the yuan down, many people quit the real estate market. Property prices are sure to fall.”

“… But no one will buy it, because everyone is cutting prices…”

There it is again: Price equals Value.

Raise the price and you raise the value and raising the value entices people to rush in and buy like a herd of lemmings. Cut the prices and you cut the value and then the lemmings flee.

Econ 101 taught us one thing about supply and demand in that if you wanted to move inventory then you should lower prices but Econ 101 must have been talking about consumption items, not investment items, because people do not seem to lose their minds when it comes to buying consumption items such as they do when they buy investment items.

Which makes this whole aspect of human behavior interesting as hell - at least to me - and not only interesting but profitable if only one could get a handle on fully understanding what is going on.

If only …

Comment by Blue Skye
2014-07-01 05:14:10

Price does not explain it. Price direction explains it.

Look no further than the HBB for examples of eager buying at insane price levels because of upward price direction (perceived or imagined) extrapolated to infinity (with a spreadsheet).

 
Comment by Albuquerquedan
2014-07-01 05:47:20

(Reuters) - China’s factory activity hit multi-month highs in June, official and private surveys showed, reinforcing signs that the world’s second-largest economy is steadying as the government steps up policy support.

Analysts believe the worst for the economy is over as recent “mini-stimulus” measures kick in, but said Beijing may have to announce more stimulus measures in coming months to offset the increasing drag from the cooling property sector.

The official Purchasing Managers’ Index (PMI), published by the National Bureau of Statistics, hit a six-month high of 51 in June, in line with market expectations and up from May’s 50.8.

The final HSBC/Markit purchasing managers’ index (PMI) for June rose to 50.7 from May’s 49.4, surging past the 50-point level that separates growth in activity from contraction for the first time since December.

Comment by Combotechie
2014-07-01 06:34:18

“China’s factory activity hit multi-month highs in June, official and private surveys showed, reinforcing signs that the world’s second-largest economy is steadying …”

China is saved!

“… as the government steps up policy support.”

Then again, maybe not.

Comment by Albuquerquedan
2014-07-01 06:42:13

Their leadership at least has a clue about promoting economic growth. They have cut taxes for small businesses, Obama has just increased the burden of all businesses both small and large with Obamacare taxes and hidden energy taxes caused by use of regulation.

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Comment by Combotechie
2014-07-01 06:58:44

China did well because used to sell the stuff they made to fools with money who lived in the West.

The fools still live in the West but now these fools are broke, and it’s hard to sell something to fools who are broke.

 
Comment by Albuquerquedan
2014-07-01 07:04:01

China has other markets now including its own people who make 25 times what they made just a few decades ago and are now getting raises which are larger than Americans not just by percentage but in cents per hour.

 
Comment by Blue Skye
2014-07-01 07:38:49

“25 times…”

and a $25 Trillion credit expansion to support that, making theirs the most fragile economy in the world.

 
Comment by Albuquerquedan
2014-07-01 10:20:42

Where are you getting the 25 trillion dollar figure?

 
Comment by Albuquerquedan
2014-07-01 10:31:14

This is a bit dated but it shows the mortgages in the US as a percentage of GDP being much higher than the mortgages of China, I just don’t know where your number is coming from, it is contrary to all the data I have seen which shows the total debt of China private and public to be less than half of the total debt of the US.

http://www.milkeninstitute.org/pdf/China-HousingMarket.pdf

 
Comment by Albuquerquedan
2014-07-01 10:37:53

The only way, you can get near that number is if you add all the government debt, local and federal to all the private debt and then you might reach 25 trillion. However, that would not be a 25 trillion dollar credit expansion over the last few years that would be the total debt and as a percentage of the GDP would be a much smaller percentage than the U.S., where the federal deficit alone would be more than 2/3 of that amount.

 
Comment by Blue Skye
2014-07-01 11:02:59

It has been posted here a few times. I am on the go and do not have a link handy.

 
 
 
 
 
Comment by Raymond K Hessel
2014-07-01 06:20:39

More DNC voters en route to Pelosi’s People’s Republic of California.

http://news.yahoo.com/u-move-central-american-immigrants-california-022303858.html

Comment by scdave
2014-07-01 06:48:57

More DNC voters en route to Pelosi’s People’s Republic of California ??

But you failed to mention this in the same article…Just exposes your BS bias…

In May, federal officials disclosed they were releasing hundreds of immigrants at bus stations in Phoenix and Tucson with an order to report to an ICE office in 15 days

Comment by Raymond K Hessel
2014-07-01 19:25:19

What’s your point? There will be plenty of newly-minted Democrats to go around.

 
 
 
Comment by Raymond K Hessel
2014-07-01 06:24:17

China admits first local government loan default. You know what they say about cockroaches….

http://www.zerohedge.com/news/2014-07-01/china-admits-first-official-local-government-loan-default

Comment by Albuquerquedan
2014-07-01 06:38:30

China’s is replacing housing spending with infrastructure and defense spending, with its low national debt it can do this for decades, example of infrastructure spending:

Reuters)
Updated: 2014-07-01 14:35
Counter:6
China will spend 327 billion yuan ($52.71 billion) on 14 railway projects, the official China Securities Journal reported on Tuesday, as the country pushes ahead in transforming its transportation sector.

The projects will total over 3,700 kilometers and will include the Ejin-Hami, Hangzhou-Huangshan, Beijing-Shenyang passenger lines, the report said, citing unidentified government officials. It did not give a timeframe.

The state-owned China Railway Corporation (CRC) has already put 5,586 km of rail lines into operation since its formation in March 2013 following the dissolution of the Ministry of Railways, the official Xinhua news agency reported in March.

China abolished the ministry in March and transferred its regulatory duties to the Ministry of Transportation.

The sector was plagued with allegations of waste and corruption that culminated in the sentencing of former minister Liu Zhijun in July on charges of bribery and abuse of power.

China had more than 100,000 km of railway in operation by the end of 2013, 10 percent of which was for high speed trains, Xinhua said.

Comment by Beer and Cigar Guy
2014-07-01 09:26:35

MORE is not always BETTER. Think ‘ghost cities’…

http://www.scmp.com/lifestyle/technology/article/1299188/chinas-high-speed-rail-programme-case-too-far-too-fast

“…A year after the Wenzhou disaster, an accident in Hubei province pointed to another systemic issue. In March 2012, a 300-metre section of a high-speed railway collapsed in a rainstorm. There were no casualties and it attracted little media attention. Officials blamed the rain but later admitted nine kilometres of track needed to be replaced. They found that the foundation under the tracks had sunk as much as 4.22 millimetres.

High-speed railways run on “ballastless” track technology that enables very fast yet smooth rides on tracks that won’t warp with heavy use. The tracks rest on slabs made of a mix of high-quality fly ash, concrete and gravel. Fly ash, a by-product of coal-fired power plants, makes the concrete much stronger and more durable. But all the coal-fired power plants in China and the rest of the world could not possibly produce enough high-quality fly ash for the thousands of kilometres of high-speed lines that have been laid annually on the mainland…”

Comment by pazuzu
2014-07-01 15:52:56

Bah, have some faith in this Country, a pillar of truth and transparency! Did you know they are building more nuclear power plants then any other nation? And they are the one’s to do it, for the corruption free government has not reported ONE single serious nuclear accident in the ENTIRE 22 years it has operated commercial nuke plants! Great record huh?

By 2030 they project a FOURTEEN FOLD increase in atomic power. Woweee.

What could go wrong?

http://www.bloomberg.com/news/2014-06-18/french-nuclear-regulator-says-china-cooperation-lacking.html

Hmmm…

“The workings of China’s atomic safety authority are a ‘‘total black box,’’ said Lai. ‘‘China has no transparency whatsoever.’’

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Comment by taxpayers
2014-07-01 12:10:53

commies love trains - here in US TOO

 
 
 
Comment by Ben Jones
2014-07-01 06:39:10

‘Sales of new homes in Beijing plummeted by 48.8 per cent year-on-year as at June 26, 2014, hitting the lowest level since 2005. The shrinking sales volume has driven Beijing’s housing inventory, including properties under construction, to a new 18-month high, the report said.’

‘Property construction in the capital of China has increased 70 per cent year-on-year in the first half of this year. Despite the bad reception for new homes, high-end housing supply is expected to surge in the following months due to the easing of restrictions from the Beijing Municipal Commission of Housing and Urban-Rural Development.’

‘Ren Qixin, deputy general manager of Yahao Real Estate Service Corp, predicted that average home prices would start to fall as more housing projects, aimed at first-home buyers, are set to flood into the market.’

Comment by Dguy
2014-07-01 07:27:52

The coming real estate collapse in China is only the most visible tip of the iceberg - when it happens all the bad loans, crooked deals, shoddy construction, and government indebtedness will come to light, and the financial system will be revealed for what it is - a house of cards. China is so screwed, and it only has itself to blame.

Comment by Whac-A-Bubble™
2014-07-01 23:45:35

Cockroaches are soon destined to scurry about in plain view without cover.

 
 
Comment by taxpayers
2014-07-01 08:09:52

Ben beware !
Sum Ting Wong and gang after u big time

Comment by tresho
2014-07-02 09:29:59

Sum Ting Wong and gang after u big time
Good thing Ben moved.

 
 
 
Comment by Ben Jones
2014-07-01 06:41:53

‘Moody’s last week, as they reiterated an earlier warning about the risks in the rapid expansion of Hong Kong banks’ lending to mainland Chinese entities. The exposure of Hong Kong to the mainland grew by 29% in 2013 to 2.3 trillion Hong Kong dollars ($297 billion), accounting for 20% of total banking assets, Moody’s said.’

‘Earlier this year, brokerage Jefferies described a “parabolic” rise in lending to mainland China, which it saw as a looming problem for Hong Kong. From almost zero in 2009, this lending has reached 150% of Hong Kong’s GDP.’

‘This surge illustrates that we are talking about a relatively new phenomenon which has coincided with massive quantitative easing by the world’s top central banks, along with a series of measures by China to internationalize its currency. This also means that assessing the level of risk when these two very different financial systems come together puts us in somewhat unchartered territory.’

Comment by Whac-A-Bubble™
2014-07-01 23:49:08

Asia Pacific
Huge Crowds Turn Out for Pro-Democracy March in Hong Kong, Defying Beijing
By KEITH BRADSHER, MICHAEL FORSYTHE and CHRIS BUCKLEY
JULY 1, 2014
On Tuesday, hundreds of thousands of people held one of the largest marches in Hong Kong’s history to demand democracy.

HONG KONG — The appeal of democratic ideas drew thousands of protesters into the streets of Hong Kong on Tuesday in a defiant but largely peaceful march advocating free and open elections for the territory’s chief executive.

A nearly solid river of protesters, most of them young, poured out of Victoria Park through the afternoon and into the evening, heading for the skyscraper-lined canyons of downtown Hong Kong, Asia’s top financial center. There, hundreds staged two sit-ins past dawn, prompting the police to remove and arrest 511 people on charges of obstructing the police and unlawful assembly.

Shouting slogans in Cantonese such as “change comes from the people,” the demonstrators largely stood their ground even after the police warned them that they were in violation of the law. Through the day, the protesters showed their determination by waiting unflinchingly and with barely a complaint under a succession of deluges for a chance to walk through downtown Hong Kong, carrying banners calling for the introduction of full democracy and reading “Say No to Communist China.” And even as organizers boasted of record crowds, they insisted that the protest was merely a dress rehearsal for much larger sit-ins that may happen this year if the Chinese government refuses to allow free elections in this former British colony.

 
 
Comment by oxide
2014-07-01 07:00:47

Hey wait, this is “China.” Why is “The guillotine” in “quotation marks?”

 
Comment by Ben Jones
2014-07-01 07:03:56

‘An Australian parliamentary inquiry into foreign purchases in the domestic real estate market on Friday raised concerns at Chinese property investors who obtain finance through “shadow banking” in China, local media reported.’

‘The committee’s deputy chair, Ed Husic, said the “shadow banking” market in China is a system that usually lacks regulation and oversight. “With the rise of the shadow banking system in China, where people are going outside of the banking system to be able to finance investment, there are some concerns about the quality of the loans and whether or not they will actually be durable,” Husic told Australian public broadcaster ABC.’

“If those loans are being used to finance development in Australia, and if they fall over, what is the exposure of the Australian banking system to that?”

‘The committee is investigating complaints that property price hikes in major Australian cities may be fuelled by an influx of foreign buyers. Current rules allow non-residents to buy new property, but not purchase existing dwellings.’

‘The committee has heard that some foreign buyers consider the existing A$85,000 (US$80,000) fine for buying existing dwellings just a cost of doing business.’

Comment by Raymond K Hessel
2014-07-01 19:29:13

Aussie exports dropped sharply this month. Since China is their biggest export customer, maybe that means…no, INCONCEIVABLE!

http://www.marketwatch.com/story/australia-exports-fall-sharply-sending-currency-lower-2014-07-01?link=MW_home_latest_news

 
 
Comment by Captain Credit Crunch
2014-07-01 07:04:36

“As a less developed second-tier city, Hohhot, with a total population of 3 million and a registered population of 2 million…”

God China is huge. 3MM is second tier…

Comment by Whac-A-Bubble™
2014-07-01 23:53:11

Yep. For reference, San Diego County’s population was circa 3.1MM, fifth largest county in the US, in the 2010 Census.

 
 
Comment by Ben Jones
2014-07-01 07:08:29

‘In the midst of a housing shortage, greater Christchurch could be headed for a glut of big new homes. The mushrooming rows of large houses in subdivisions have sparked warnings they are not what is badly needed.’

‘Valuer Bevan Fleming said there were too many similar, executive-style houses going up. Priced at $400,000 to $450,000, they would not meet the bulk of demand, he said. “They are all pretty similar houses and there are only so many people who can buy them - they’re not affordable for everyone. They are not building the right stock.”

‘John McDonagh, associate professor in property studies at Lincoln University, blamed the problem on building costs. High land development and construction costs, including fixed costs which were not size-related, meant developers made more money by building big. “Nearly all the supply being added is not where demand is going to be. They build as big as they can.”

‘Tracey Watson, manager of subdivision developer Suburban Estates, said features such as ensuite bathrooms, butler’s pantries and two living areas were almost standard. People would sacrifice section size for a bigger home: “It reflects the way we live now, and what we expect.”

Comment by Ben Jones
2014-07-01 11:40:59

Along the same lines:

‘Residential sales volumes in Manhattan eased back to modest gains in the second quarter after a year’s worth of torrid, record growth, according to a handful of reports released Tuesday. “Sales volume is high, but the rate of growth is slowing,” said Jonathan Miller, chief executive at Miller Samuel, the firm that prepared the report.’

‘That return to the norm owes in part to the dramatic price gains of last year, which prompted more people to put their homes on the market—which lifted inventory levels off the rock bottom level seen in late 2013, according to Mr. Miller. He noted that around half of all units sold changed hands at or above the asking price.’

‘However, some of the units coming to market are overpriced, the result of owners testing the waters to see if they can make a quick buck. But according to Brown Harris Stevens President Hall Willkie, there will not be as many takers in this post-recession real estate cycle.’

“Before Lehman Brothers there was this confidence that if people had to pay more, they could make up for it in the next few years as the property appreciated,” he said. “That belief is not common anymore.”

‘In fact, prudence on the part of buyers can be seen in other portions of the market, as typically tepid co-op numbers far outpaced condos in terms of the growth of both median sale price—which was $725,000 for the second quarter—and sales volume. To many experts, this comes as no surprise as the price tag for condos, especially in new developments, continues to rise.’

“This is due to an affordability factor,” said Dottie Herman, chief executive at Douglas Elliman. “The condos that are coming out are all at the top end of luxury—developers can’t afford build anything unless they can sell it at that price point.”

 
 
Comment by Beer and Cigar Guy
2014-07-01 09:16:28

“China has other markets now including its own people who make 25 times what they made just a few decades ago and are now getting raises which are larger than Americans not just by percentage but in cents per hour.”

‘CHINA: It’s different here!’

Comment by Prime_Is_Contained
2014-07-01 09:27:01

LOL… :-)

 
Comment by Albuquerquedan
2014-07-01 10:23:54

No, It is not different is China and that is my point. The same rules apply, affordability of houses is determined by wages and the price of the house. In this country there is no wage inflation so there should not be double digit housing increases, but in China wages are going up by 10% per year so double digit increases are not as big a problem for houses.

Comment by In Colorado
2014-07-01 10:40:58

What about the fact that houses over there cost 100 years of wages and there are twice as many houses as needed?

 
Comment by Beer and Cigar Guy
2014-07-01 10:45:26

Yeah, not the same.

“…Based on the house price to wage ratio compiled by the International Monetary Fund, or IMF, China’s large cities have the most expensive real estate in the world. Beijing is particularly expensive, as party officials deploy their “hard-earned” cash. The numbers mean that it would take an average Beijinger 22.3 years of earnings to pay off their mortgage….”

Comment by Albuquerquedan
2014-07-01 10:50:12

Beijing is particularly expensive, as party officials deploy their “hard-earned” cash.

So what is their average wage as related to the house prices since they are driving the numbers?

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Comment by Albuquerquedan
2014-07-01 10:51:22

That is one key, the average reported wage in China is much lower than the real wage hence the price for housing.

 
Comment by Albuquerquedan
2014-07-01 10:56:34

The absolute prices in Beijing while high are much less than similar world cities:

http://www.cnbc.com/id/101468652#.

 
Comment by Beer and Cigar Guy
2014-07-01 13:00:24

So now you ARE saying ‘it’s different here’!?! Look, just for the sake of clarity, the Chinese RE bubble is popping as we speak and they will also feast upon the big turd just like everyone else in their respective bubbles. And their will be wailing and moaning and gnashing of teeth, and a great rushing for the exits will take place, and the plaintive sound of The Sad Trombone will echo throughout the land…
http://www.sadtrombone.com/?play=true

 
Comment by In Colorado
2014-07-01 13:16:44

That is one key, the average reported wage in China is much lower than the real wage hence the price for housing.

If anything, I would expect the exact opposite.

 
Comment by Albuquerquedan
2014-07-01 14:36:56

Really so you think the Chinese are buying the houses in Cali with 2.50 an hour wages?

 
Comment by Albuquerquedan
2014-07-01 14:39:48

BTW, I think you need to read this study about underreported income:

http://www.econ.ucdavis.edu/faculty/woo/9.Wang-Woo.Hidden%20Income%20in%20China.2010-12-25.pdf

 
 
 
Comment by Whac-A-Bubble™
2014-07-01 23:54:38

“No, It is not different is China and that is my point. The same rules apply,…”

Are you saying the US is Communistic or that China is a Democracy?

Which is it?

 
 
 
Comment by taxpayers
2014-07-01 12:09:46

us regulators warn banks” mo free sht w home equity loans form 2008-9?

what happened to the recovery summers?

 
Comment by Raymond K Hessel
2014-07-01 19:32:31

I wonder how much longer it’s going to be before China decides it needs the “living space” and minerals that New Zealand and Australia have for the taking.

http://www.youtube.com/watch?v=9KaX0F8GojI

 
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