The Elephant In All Of Our Rooms
The Orange County Register reports from California. “Sometimes it seems to be increasingly China’s world, and we just happen to live in it. Yet, a funny thing has happened on the way to global domination – the Chinese are coming here with their money, and, often, with their families. Rather than seeing China as the land of opportunity, more Chinese have been establishing homes in America, particularly in California, where they account for roughly one-third of foreign homebuyers. I witnessed this recently while house hunting. Stonegate, a new Irvine development we looked at, had price tags well over $1 million, beautiful floor plans and well-designed amenities – and, essentially, no yards. Upward of 80 percent of buyers in the new Arcadia development, according to a report in Bloomberg, are overseas Chinese.”
“U.S. China Real Estate Association President Bill Seto has expressed concerns ‘that the Chinese are pricing the middle class, and even some wealthy Americans, out of certain markets, especially when it comes to housing.’ Dependence on Chinese investors also holds some perils. As occurred when Japan’s firms sold off many of their real estate investments in the 1990s, changes in China’s economy, which is slowing and facing major corrections in its stock and property markets, could depress real estate prices and slow the flood of investment. In a U.S. economy already suffering from slow growth, deindustrialization and an ever mounting tsunami of regulation, the loss of stimulus from China could be a devastating.”
The Epoch Times. “Chinese have poured a lot of hot money into Canada’s real estate market in recent years. This has sharply pushed up prices and forced many locals out of the housing market in Canada’s major cities. Take my colleague Mike, for example. He’s a systems management engineer in my department, with an annual income of about $70,000 to $80,000 Canadian dollars, more than double the average income of his peers. Mike is married with two children. Three years ago he bought a big house. You’d think that he’s a happy man. But recently Mike seemed depressed. I finally let go of my Chinese trait of being reserved and asked him if something was wrong. He glared at me and said: ‘It’s all because of you Chinese!’”
“I was taken aback and asked him to explain. That’s how I found out that Mike has serious financial worries. When Mike bought his house, the market was already extremely high and quite unaffordable. The average home price in Toronto was over four times his and his wife’s combined annual income. So his financial situation has been tight. Then his wife was laid off a year ago. After six months she found another job, but with a big pay cut. Their household income had dropped quite a bit, and after paying all their monthly bills—mortgage, insurance, property taxes, car loans, and other living expenses—they ended up with a shortage of several hundred dollars every month.”
“‘Home prices in Toronto are inflated because of you,’ he went on. ‘We cannot afford them! My parents are retired. They planned to spend their remaining years in their old home. But the value of their house has gone up and property taxes have also increased. They could not afford it anymore, so they had to sell and move far away to a small town in Ontario.’ ‘Our present living standard is all caused by you Chinese,’ Mike added.”
“I was not happy listening to Mike. It never occurred to me that we Chinese look so bad in the eyes of the local people. But I did not say anything as I felt that Mike must be very frustrated to be saying these harsh words. Later, when I thought it over, I came to see Mike’s point. Home price have gone out of control in places where Chinese people have settled in recent years, such as New York, San Francisco, Los Angeles, Vancouver, Toronto, Sydney, Melbourne, etc. Despite the global economic downturn, Chinese people are still buying houses while Westerners are unable to afford a house.”
The Australian. “We go to the weekend with tiny Greece once again at centre stage, but with the ‘elephant in the room’ — indeed, in all of our rooms — China, jostling for the spotlight. Greece matters most to Greeks — there, here and everywhere — and then to Europe more generally. For the other 6.5 billion people on the planet, apart from market gyrations? Not so much. With China it works the other way. The middle kingdom matters big time for all 7 billion-plus of us on the planet; and it matters supersized big time for the 25 million-odd of us down under, including our Greek component.”
“We’ve been in the process of discovering just how much China matters for us as its growth rate has stepped down from 10 per cent plus to the 7 per cent, which is something of a line in the sand for everyone — there, here and everywhere. In essence, a 7 per cent growth rate brings — brought? — to an end the ‘boom’ part of ‘resources boom.’ With a sustained 7 per cent China growth rate, we would keep the resources development that’s occurred, but we’d get no more.”
“This is a very strange time for a property market boom or ‘bubble,’ when we are waiting for a global financial implosion; and if that doesn’t get us, perhaps the big China (grizzly, not Panda) bear will. The reason is that it’s not really a ‘property market’ boom but a ‘love for assets in the time of choleric low interest rates’ story. With tens of trillions of dollars of global investor money, supplanted by trillions of ‘free’ central bank liquidity, there’s a desperate global search for either or both yield and assets.”
“In our case, this demand has been further leveraged by Asian and especially Chinese ‘flight to safety — and perhaps profit’ buying of both new and second-hand property. A Melbourne or Sydney property that’s risen from $2.2 million a year ago to $3m today almost hasn’t risen in cost at all for such overseas buyers — while its appeal is significantly greater now than then. Indeed the very slowing of China’s growth rate will spur greater outflows from the Middle Kingdom.”
“What we don’t seem to understand is that we are embarked on the mother-of-all asset sales. Let’s hope we don’t look back on it as also the mother-of-all fire sales.”
From Bloomberg. “It sounded like a good idea at the time: encourage growth in China’s stock market as a way for companies to raise capital. And if that paid down some of the nation’s record debt load in the process, so much the better. The problem: promoting a market where retail investors dominate daily trading left policy makers vulnerable to swings in sentiment that are tough to control.”
“‘It’s too early to call a crisis, but the butterfly wing has swung and ripple effects are expected,’ said Zhou Hao, a Shanghai-based economist at Australia & New Zealand Banking Group Ltd. Zhou said the stock price plunge may spread to cause interbank liquidity strains, and banks may become more cautious in lending to firms with large exposure to equities.”
“‘It’s still unknown how much and how widely bank money is involved in the unofficial margin trading,’ said Chen Xingdong, head of macroeconomic research at BNP Paribas SA in Beijing. ‘It’s an unprecedented situation in China’s stock market history. A stock market bubble was partly inflated by the visible hand, and then the bubble burst, causing panic.’”
News.com.au on China. “The empty streets of new-age cities in China have been attracting international curiosity for years. Any train ride along the eastern side of the country will expose hundreds of these unfilled settlements. A few hours from the mega metropolis of Shanghai, one such city is raising eyebrows. Not just for its empty towers but also for its very familiar style. It’s Tianducheng — a prime example of an urban development that’s failing spectacularly.”
“Nothing could have prepared me for the eeriness that I found inside. But perhaps the most poignant moment of my trip came at midafternoon on my fourth day in the city, when I found myself strolling down what looked to be the famed Champs Élysées. Weaving between manicured hedges and sprawling fountains, the iconic Eiffel Tower soared ahead in the distance. Parisian facades rose high on both sides of the boulevard.”
“Unfortunately, high real estate prices and a change in economic growth have resulted in few visitors — or residents. Original plans had an expected capacity of 10,000 residents, but today the town’s population is around 10 per cent of that. The streets are unoccupied, shop fronts have been boarded up, iron railings are rusted over and that famous fountain is bone dry.”
“The skies remain grey most of the year from the heavy pollution drifting in from factories in the surrounding area. The only time you will see a hive of activity is at the end of the day, when construction workers finish their shifts. The park that surrounds their Eiffel Tower is littered with trash and overgrown with weeds. The odd cow wanders across the fields while security guards sleep in the shadow of the tower. Basketball courts are covered in dirt, with no one around to use them. One corner of the park holds the worker’s quarters.”
“The sanitary and living standards are appalling, but no-one complains for fear of losing their employment opportunities on the adjacent building sites. On their Champs Élysées, the situation is only marginally better. No water flows through the canals and business doors are bolted shut. There’s no money to be made from this fake Parisian city. No flocks of tourists and no romantic movies being filmed beneath the Eiffel Tower. Just more money being spent on new residences that no one can afford or would even want.”
‘The crisis of 2015 is characterized by aggravating circumstances: a category of debt investors. Many Chinese people started to gamble on the stock market at the expense of borrowed funds. The official statistics shows that they borrowed at least $322 bn from brokers. The shadow banking sector also provided loans with up to 22% annual rates. The funds were invested in the most dynamic speculative bonds and collapse of the stock market in 2015 is able to trigger banking and industrial crises.’
‘Social upheaval can also take place: up to 100 million of Chinese citizens gamble on the stock market and it’s too much even for China.’
‘In case of a negative scenario the Chinese crisis can burst a global bubble, which is politely called “the global financial system”.
When people are borrowing at 22% annual interest to buy stocks, that’s the equivalent of playing Russian Roulette with five bullets in the gun. Just unbelievable. It reminds me of a story I read back in 1999, when some idiot purportedly weighed not paying his taxes, and investing that money in tech stocks, because he anticipated gains which would dwarf the resulting IRS penalties.
It also shoots full of holes the notion that the Chinese are prodigious savers.
What is $1 Trillion divided by 1.3 billion people?
Prodigious indeed.
It also corroborates the well-known fact that one of our most prolific posters is a gifted fiction writer!
Those who sustain crushing losses on housing have to lie to themselves.
Right Dan?
‘The Greek crisis is a stark reminder that the world economy is still feeling the malign effects of the 2008 financial crisis.’
‘Two recent research publications from the International Monetary Fund (IMF) and Bank of International Settlements (BIS) show policymakers are still at loggerheads about the causes of financial crises.’
‘The biggest source of disagreement is the role of loose monetary policy in creating the conditions for a financial crisis. IMF has said in a recent working paper, authored by Bank of England economist Ambrogio Cesa-Bianchi and Alessandro Rebucci of Johns Hopkins University, that the major policy error in the years leading to the financial crisis was not excessively lax monetary policy but the lack of an effective regulatory framework to protect financial stability. The implicit argument is that monetary policy should target inflation while prudential regulations should take care of financial stability issues.’
‘BIS has put forward a dramatically different view in its latest annual report. It says low interest rates have encouraged the growth of indebtedness in the world economy. Loose monetary policy has also led to the misallocation of capital. The BIS annual report questions the current fashion of passing on the responsibility of financial stability to regulation rather than monetary policy.’
‘BIS has given two particularly interesting reasons why interest rates are below equilibrium levels. One, the mainstream habit of trying to gauge the correct levels of interest rates based on inflation alone rather than financial stability as well. Two, central banks have had asymmetric responses: they have been very wary to taking the punch bowl away when the party is in full swing but hastening to slash rates when trouble hits. In other words, the reluctance to raise rates in good times combined with an enthusiasm to cut them during downturns has led to overall interest rates drifting downwards in the past two decades.’
‘The IMF view is clearly a representation of the mainstream analysis of economic policy while BIS seems to be deeply influenced by the Austrian view that a credit boom leads to a misallocation of capital (think of the US housing bubble, for example).
These are more than just academic sparring matches. The debate has important implications for policymakers right now.’
‘The global economy has seen almost unprecedented monetary expansion since 2009. The emerging markets have meanwhile had to tackle the problem of appreciating currencies as well as asset bubbles because of the extraordinary monetary policy followed in the rich economies.’
‘Just consider one parameter: the output gap, or the difference between the potential growth rate of an economy and its actual performance. This is now a workhorse in economic policy analysis. The basic rule is that monetary policy should be expansionist when the output is negative.’
‘What the neo-Austrian analysis by BIS suggests is that monetary stimulus merely adds to the misallocation of capital in a bid to get growth back on track.’
‘The underlying issues remained unsolved. Such misallocation of capital (think housing bubble once again) eventually hurts productivity and hence growth over the medium term. In other words, money is not neutral.’
“Two recent research publications from the International Monetary Fund (IMF) and Bank of International Settlements (BIS) show policymakers are still at loggerheads about the causes of financial crises.”
I ran this question across my financial advisor (my paperboy) and he told me it was because people were spending money that they did not have.
I carefully wrote down his rather complicated response so that I would get it right before I shared it this morning with my fellow HBBers.
Did he mean that we should only spend “saved” money? Please explain. It sounds complicated.
I told him about the wisdom offered up by David Lereah and his response was to make me pay him in advance.
What is “saved” money?
What is “saved” money?
Gold coins you hide from the Obama administration.
What is “saved” money?
It’s the discount you get when you buy something you don’t because it’s “on sale”
What is “saved” money?
It’s the discount you get when you buy something you don’t NEED because it’s “on sale”
“Gold coins you hide from the Obama administration.”
I should be a leprechaun?
I think there is a pamphlet out there that explains how to “save” money before you spend it. It’s only a page or two if I remember correctly.
By JENNY ANDERSONJULY 3, 2015
When the financial crisis hit Iceland seven years ago, Gudmundur Kristjansson, a 55-year-old fisherman with a wide smile, weathered face and mischievous eyes, almost lost his business. Interest payments on his loans soared 300 percent. He had to sell his two fish factories and two of his five fishing boats. “We didn’t invest for many years,” he said, “because we were only paying interest.”
His tribulations were shared by the whole country. After Iceland’s three largest banks fell in the space of three days, the currency collapsed, the stock market fell 95 percent and nearly every business on the island was bankrupt.
Short-term suffering followed, but today, Iceland is buzzing: Unemployment is 4 percent, the International Monetary Fund is predicting 4.1 percent G.D.P. growth for 2015, and tourism is booming. Mr. Kristjansson has just bought Nanoq, a used boat from Russia that recently was being prepared for a fishing trip to Greenland.
‘However much pain the iron ore price is causing, remember that it could be worse – you could have an economy substantially dependent on milk. Cue the kiwis.’
‘Even when New Zealanders were getting uppity about their dollar approaching parity with the Aussie at the start of the year, the milk party was coming to an end. This week the kiwi dollar fell to a five-year low against the greenback as global dairy prices sank to a six-year low.’
‘Yes, iron ore prices have been falling again, too, but the Australian economy is more diversified than that of New Zealand. The thing about milk is that it can be produced just about anywhere that has water and dirt. High milk prices encouraged increased production everywhere.’
‘For example, Bloomberg today carries a story about American dairy processors dumping milk they simply can’t sell as American milk production runs at a record high for the fifth year in a row.’
‘As previously reported, the Europeans have dropped quota restrictions and announced they want to become the world’s biggest milk product exporters. Part of that is Ireland intending to increase production by 50 per cent. At the opposite end of the earth, little Uruguay has been travelling down the New Zealand path of a China-driven milk boom.’
‘What makes the milk fallout worse for New Zealand is that the country’s central bank is having to deal with a housing bubble in a single city at the same time as the key commodity sours. (Sounds a little familiar, doesn’t it?)’
This drop in milk prices is obviously caused by Pizza Hut stuffing their crusts with hot dogs instead of more cheese. What happened to the agriculture department people in charge of getting Americans to demand more cheese. Were they bought off by the hot dog people?
Gotta get people eating cow guts.
Whoh polly,
Welcome back!
FWIW, Irish “milk product,” namely Kerrygold butter, is favored among dairy-paleo low carb dieters because Irish cows are grass-fed.
Are irish raspberries machine picked?
Well, hello there, stranger!
Well, hello there, stranger! ??
Yes…Hi Polly…Now where is Ahansen ??
And TxChick ?
TxChick got banned for awhile but Ben let her back in…Last I spoke with her via email she had bought a house…Then…Maybe 6-12 months ago I seen a post she said that she sold it…I suppose at a profit…
Doubtful Dave doubtful.
‘Rumor-spreading short sellers and foreign investors with a hidden agenda. If you believe China’s state-run media, those are some of the key culprits for a stock-market rout that erased $3.2 trillion of value in three weeks — or almost $1 billion for each minute of trading on mainland exchanges. The underlying message, that market manipulation is fueling the selloff, was reinforced by securities regulators last week as they pledged to crack down on “vicious” short selling.’
‘The problem with that narrative, though, is that the numbers tell a different story. Short positions on the Shanghai Stock Exchange totaled just 1.95 billion yuan ($314 million) on Thursday, or less than 0.03 percent of the country’s market capitalization, as bears closed out more than half their bets since June 12. Foreign money managers own fewer than 3 percent of Chinese shares, and they’ve been adding to holdings in Shanghai as prices tumble.’
‘The more likely reason for the rout, according to analysts in and outside China, is simply that the nation’s longest-ever bull market pushed valuations to unsustainable levels. Local investors, who borrowed record amounts of money to amplify their bets, lost faith that share prices would keep rising and now they’re heading for the exits.’
‘Instead of looking for scapegoats when share prices sink, authorities should push forward on pledges to reduce the government’s role in markets, according to Teng Bingsheng, associate dean at the Cheung Kong Graduate School of Business in Beijing.’
“They are trying to stop the plunge, but this is clearly the wrong way to do it,” Teng said. “The Chinese stock market is already the most manipulated in the world. It’s an overheated market and you can’t stop people from selling.”
If it is “unsustainable” then efforts to sustain it will be wasted.
That won’t stop the Chinese authorities from pouring money down a rat hole.
Reduce the government’s role in markets? In China? In another time that guy would have been shot. In this time, however, we have the phrase “state-backed margin lender.”
‘The latest monthly QV House Price Index show Tauranga home values have risen 4.1 per cent in the last three months and are now 0.8 per cent above the previous peak of 2007. A spin off from large numbers of Aucklanders moving to Tauranga, Hamilton and the Western Bay of Plenty.’
“There are reports that of those present at open homes in Tauranga, as many as 60 per cent are regularly from Auckland,” says QV national spokesperson Andrea Rush.’
‘QV homevalue Tauranga registered valuer David Hume says there has been significant demand and increasing property values with homes in Tauranga and Papamoa now selling much more quickly than they have for several years.’
‘He says the strong demand from out of town buyers has created a degree of panic for local buyers not wanting to get priced out of the market with the $300,000 to $500,000 range seeing the biggest demand, also fuelled by historically low interest rates.
“A much higher proportion of properties are being sold at auction as real estate agents are struggling to correctly price properties,” says David. “There has also been a sharp increase in sales in the $1 million plus range, as lower value benchmarks increase. Real estate agents reporting a 100 per cent increase in sales in this price bracket in comparison to 2014.”
‘In the Western Bay of Plenty, the market is strengthening, sales volumes are up across the board and buyers are coming from far and wide. There’s been a significant increase in demand for property in Omokoroa in the last two months and the market there is frantically busy and there is a shortage of listings, adds David.’
‘He says the recovery of the Kiwifruit industry has also exposed a real lack of rental accommodation in Te Puke which has resulted in increasing demand from investors looking to purchase rental properties for good rental returns.’
‘Paengaroa has seen values of vacant section in new residential subdivisions increase by 50 per cent in the last 12 months.’
‘There has recently been considerable commentary and even criticism of the Reserve Bank of New Zealand for holding interest rates above other countries despite CPI inflation being temporarily below the 1-3 per cent target range. The RBNZ has also been criticised by Treasury for failing to make a robust case to “intervene” against the housing market with policies such as LVR that attempt to curb the most aggressive lending practices.’
‘Should the RBNZ simply leave the market to its own devices and allow Aucklanders to indulge in our favourite pastime of swapping debt-funded houses among ourselves at ever higher prices?’
‘A recent study involving the Federal Reserve Bank of San Francisco looked at 17 advanced economies since 1870 and examines the long-term economic impact of housing bubbles, equity market bubbles and bank loan booms. The findings are that the financial stability risks of a moderately leveraged equity market boom/bust are very small but the risks from a loan-financed housing boom are huge.’
‘In recent times, the impact of the Nasdaq crash in 2000 was painful for those who paid absurd prices for companies specialising in vapour-ware but the wider economic impact was limited.’
‘Indeed, the sharp interest rate cuts by the Fed to limit its aftermath arguably paved the way for the remarkable housing and credit boom that followed and whose bust in 2008 is still being recovered from today.’
‘Examples of past boom/busts include the Australian real estate boom of the 1880s financed by overseas inflows and immigration which blew apart in the early 1890s and caused a deep recession verging on depression.’
‘A US real estate boom/bust in the 1920s centred on outside money investing in Florida and preceded the equity market crash of 1929 by several years. Rather than immigration, financial deregulation was the driver of the Scandinavian boom of the 1980s and bust of the 1990s.’
‘Japanese real estate peaked in 1991 and the study points out that by 2012, the nominal value of real estate was about half of its 1991 level.’
‘House prices always go up … yeah right.’
‘Thank goodness that Graeme Wheeler and the RBNZ are beginning to pay attention to the issue. It is simply bizarre that they are being criticised for being the one official institution to show some leadership and tentatively use their limited tools to lean against Auckland house prices.’
‘The RBNZ’s tools need to be sharpened rather than tempered, with other countries providing plenty of evidence for the success or failure of tools such as stamp duty, removing the tax advantages of so-called investors, overseas investment restrictions, loan restrictions et al.’
‘The evidence is compelling that the aftermath of a credit-financed housing bust is dire. Those who do not learn the lessons of history are doomed to repeat them.’
Net zero
W stock market flat properly taxes will go up more to pay defined benefit pensions
Up here 3x inflation
‘Philip Soos is 30, an economist and, more significantly, a renter. He’s in no hurry to buy. Soos lives in Melbourne, Australia. Melbourne’s housing prices have experienced the same alarming rise in value that Vancouver’s have, and, as in Vancouver, many in the public blame Chinese offshore buyers as the main cause.’
‘Soos is not among them. As the co-author of a recently published 810-page doorstop entitled Bubble Economics: Australian Land Speculation 1830-2013…Soos and his co-author Paul Egan blame two decades of rampant domestic speculation as the reason for the rise in residential prices.’
‘Soos enlarged upon his thesis. In a co-authored submission made last week to Australia’s ongoing parliamentary inquiry into housing, he and economist Lindsay David made a prediction of which Metro Vancouverites might take note, since they are caught in the same dynamics as those that afflict the Australian housing market.’
“Housing prices across all capital cities,” they wrote, “remain grossly inflated relative to rents, income, inflation and GDP. What event or set of events triggers the beginning of the end of the housing bubble is not yet known.”
‘But those unknowns aside: “A bloodbath in the housing market, however, appears a near certainty due to the magnitude of falls required for housing prices to again reflect economic fundamentals. The largest residential land market bubble on record is truly incomparable and dwarfs earlier speculative episodes in the commercial and industrial land market.”
‘Australians, Soos said in a phone interview, have the third highest household debt to GDP in the world, after Denmark and Switzerland. Canada, he said, is not far behind. “What’s been driving the bubble is the taking on of unaffordable mortgage debt. We’re so over-debted, it can’t continue on. The debt burden will become so onerous and so toxic that sooner or later the whole thing will just collapse.”
‘Soos believes the Australian government won’t do anything to correct the situation. Quite the opposite, he said. A raft of generous tax writeoffs and low mortgage rates have only encouraged and sustained the real estate rush, he said.’
“The government’s not going to do anything because it’s so deeply in the pockets of the real estate industry and developers.”
‘A Royal Bank of Canada report early this year found that Canadians had taken on new record levels of mortgage debt in 2014, and that our combined household debt of $1.82 trillion had surpassed the country’s GDP of $1.65 trillion by last year’s end. And here’s a statistic that’s timely, given the news out of Athens: Between 2007-2014, Canada’s household debt-to-income ratio rose more than any other country except Greece.’
‘Soos was asked what effect Chinese offshore investors might have on a bubble. A recent Credit Suisse study, which I quoted in an earlier column, predicted that $60 billion from Chinese offshore investors and recent Chinese landed immigrants will flow into the Australian residential real estate market. Couldn’t that sustain the market?’
‘Soos agreed, yes, it could, but only for a time. “Chinese investors may have pushed out the day of reckoning … but the bubble definitely has to burst.”
‘There are those who disagree with Soos, including, no surprise this, the Australian government. His is a minority position. Soos takes it happily. “There are 15,000 economists in the U.S., and you know how many predicted the financial crisis of 2007-2008? Fifteen. That’s 0.1 per cent. You know how many Irish economists predicted the economic collapse there? Three.”
The quote of the week:
“There are 15,000 economists in the U.S., and you know how many predicted the financial crisis of 2007-2008? Fifteen. That’s 0.1 per cent.”
14 of them were just joking.
they’re gov workers and or work at EDU’s -same as gov workers
NO one predicted opil drop, not even on BEN’s bb
that surprises me
A University of Arizona economist by the name of Marshall Vest gave me the first inkling that something might be wrong in the AZ housing market. That was in March 2002, and, yes, he used the word “bubble.”
For some reason, the argument that economics is more social science than hard science is still on the fringes. So is the fact that economic choices, such as those being made by central bankers, also are political choices.
‘The trend has already hit Sydney, Vancouver and the U.S. Now it’s happening in Japan: busloads of real estate buyers from China coming in, buying up homes and pushing prices higher. Realty agencies in Beijing are organizing twice-monthly tours to Tokyo and Osaka, where 40 Chinese at a time come for three-day property-shopping trips, seeking safe places to invest their cash abroad.’
‘Partly as a result of nascent Chinese buying, Tokyo apartment prices have reached the highest levels since the early 1990s, up 11 percent over two years, according to the Real Estate Economic Institute Co. “The demand is like water exploding up from a well,” said Zhou Yinan, an Osaka-based agent at Chinese brokerage SouFun Holdings Ltd.’
‘Thousands more mainland Chinese are coming on their own, hitting real estate agencies in Tokyo’s Ikebukuro Chinatown district. Classified advertisements including properties for sale are piled up in free Chinese newspapers outside a Chinese supermarket.’
“There are so many Chinese buyers recently,” said Song Zhiyan, a broker at BestOne Co. realty in Ikebukuro, who uses the messaging application WeChat to reach thousands of potential customers in China, who can then fly to town to complete purchases. “I only work with clients who can pay cash. Why waste everyone’s time?”
‘She tells them to hurry: Properties are gone so fast that those who try to negotiate the price find them already sold. Her transaction volume exclusively for mainlanders buying in Tokyo has tripled over the past six months, Song said.’
Well gosh, that’s just a healthy market.
Sorta like bringing someone who smoked meth-amphetamine to the doctor and having the doctor proclaim that the patient is “very healthy”.
Every country is competing fiercely for dirty Chinese money, at the obvious expense of their own young people.
Given that Japan’s population is decreasing, it might be a good idea to sell surplus vacation houses to ChiCom for top Yen.
The very idea of Chinese buying a vacation home in Japan, where they are pretty much despised, does make me chuckle. At least in Canada and the US they don’t stand out that much.
Buss loads of imported greater fools
I don’t think the Chinese are looking for a return on their investment, or even return of 100% of principle. They just want to make sure they don’t lose everything when the biofuel hits the wind turbine in China. And they’ll have a safe house.
Yup, the US is the ultimate safe haven when things get scary.
They just want to make sure they don’t lose everything ??
Yep…I have heard a number of people make that statement…
But Dan says China is going to grow to the moon forever? Why would anyone want to take money OUT of such a place?
‘Dismayed by the millions of unsold homes in China’s troubled real estate market, the Chinese government is taking matters into its own hands: by buying some properties and turning them into public housing. Like a white knight riding to the rescue of distressed developers, a handful of local governments are snapping up thousands of empty homes at hefty discounts and re-selling them to the country’s poorest households.’
‘This cannot be a cure-all for China’s huge supply overhang. At the end of May, according to the National Bureau of Statistics, unsold residential floor space totaled 657 square kilometers - the most unsold space in at least two years, and covering an area nearly the size of Singapore.’
‘All of this comes with a caveat: government purchases of homes - done with discounts averaging between 10 percent and 52 percent - add to a mountain of public debt and do little to discourage the next housing bubble.’
‘Online documents showed authorities, through tenders, bought 3,660 housing units from eight developments in May for between 2,766 yuan to 3,612 yuan ($446 to $582) a square meter. “We will watch the situation in the (housing) supply,” said an official at the Dongsheng housing authority who declined to be named. “If there is a need, we will buy again.”
‘New housing space completed in Inner Mongolia last year was 24 percent less than in 2013, the second-biggest decline among China’s 31 provinces and regions, the Chinese Academy of Social Sciences, a state think-tank, said in May.’
“It helps to run down the inventory, but not by much,” a broker surnamed Hua said of the government’s purchases.’
‘Analysts warn against betting on a dramatic turnaround. Developers do not want to slash their profit margins by selling houses to the government at discounts of up to 52 percent - the figure in Inner Mongolia - unless they have to.’
“If the market has enough buying power then we would sell to the market,” said an official from a developer that sold homes to the government recently. “But the market’s buying power has weakened by too much. My feeling is that most part of the housing inventory has not been digested,” he said.’
They’re still building:
‘New housing space completed in Inner Mongolia last year was 24 percent less than in 2013′
This goes with the link and I am not sure where it will post:
THE area of new homes sold rose to a record in Shanghai last week amid continuously strong sentiment while average price remained at a high level, latest market data suggest.
Citywide, some 522,700 square meters of new residential properties, excluding government-subsidized affordable housing, were sold during the seven-day period ended Sunday, Shanghai Deovolente Realty Co said in a report released today.
Average cost of new houses, meanwhile, fell 3.1 percent week over week to 33,599 yuan (US$5,401) per square meter.
“The surprisingly robust sales registered in the last two days of June, or more than 300,000 square meters in total, helped push the seven-day volume to a record high,” said Lu Qilin, a researcher at Deovolente. “And medium to high-end properties continued to be popular among home seekers with the average cost of new homes remaining above the 30,000-yuan-per-square-meter threshold for the tenth consecutive week.”
In the luxury segment, for example, 430 new housing units costing more than 50,000 yuan per square meter were sold across the city last week, a rise of 31 from the previous seven-day period, according to Deovolente data. Pudong New Area, in particular, recorded sales of 91 such units, the most in the city. Xuhui and Huangpu districts trailed with weekly transaction of more than 60 such units each.
Business
There was an article linked here last winter saying that the empty city building had peaked but it would be several years before projects already started would be completed, adding something like another 70 million “homes”.
In Shanghai the housing sales are now close to twice the rate of new construction, it will not be long before construction spending increases, the money from these sales is replenishing the builders’ coffers and at least one is buying back its shares on the stock market, BTW also from Shanghai Daily:
CHINA’S leading residential developer China Vanke Co said it plans to repurchase up to 10 billion yuan (US$1.61 billion) of its Shenzhen-listed A shares to “protect investors’ interests in view of the recent instability of the A share market.”
The proposed price of the repurchase will not exceed 13.7 yuan per share, which is the closing price of the company’s A shares last Friday, Vanke said today in a statement to the Hong Kong stock exchange.
In view of a full amount of buying back, the repurchase will be no less than 730 million shares, accounting for no less than 6.6 percent of the company’s total issued stock, the developers said.
Ghost cities? The claim really shows that people do not understand a different economy:
http://europe.chinadaily.com.cn/epaper/2015-07/03/content_21169332.htm
Excerpt:
One of the main ways that large-scale new areas are stimulated is through the building of university towns. These sprawling networks of multiple college campuses are able to attract hundreds of thousands of students and staff members. Dachang, Songjiang and Lingang in Shanghai are good examples of this, as are Longzihu College Park in Zhengdong, Chenggong in Kunming, and Longgang in Shenzhen. Another strategy in bigger cities is to build a central business district and then force its occupation by movement of the headquarters and offices of state-owned banks and other businesses, as was done in Shanghai’s Lujiazui, Guangzhou’s Zhujiang and Zhengzhou’s Zhengdong.
A third strategy for sparking a population in a new area is to move in government offices and offer housing subsides and incentives to the officials and workers to get them to follow their job. Move the feeding trough to get the cows to follow.
Eventually, as people trickle in through free will or fiat, China’s new cities begin developing a social and economic base. Although there are almost always bumps in the road, political and economic mishaps, and delays, essential infrastructure generally gets built, public institutions are created, shopping and entertainment centers open, and nearly everything that’s needed or wanted to sustain life in modern China gradually becomes available.
Some of China’s most notorious ghost cities have been attracting considerable numbers of residents, according to a report by Standard Chartered. From 2012 to 2014, they found that Zhengdong New District’s occupancy rate doubled, while the population of Zhenjiang’s Dantu quadrupled, and houses in Changzhou’s Wujin district grew from 20 percent to 50 percent inhabited. When we consider that many of these new cities are packed full of high density housing, large vacancy rates can be sustained while still having a lively civic pulse and an adequate amount of economic activity. An urban area with hundreds of 30-story high-rises that are 50 percent vacant still has a large number of people.
While not every new city or town in China will be successful and not every patch of countryside will sustain an array of skyscrapers, if given enough time, most do develop sufficiently into vitalized urban areas. China’s new cities are generally not being built for today or even for tomorrow, but for decades from now, when the country’s urban population is predicted to top 1 billion and a network of mega-cities stretches across the land.
Because China’s new cities are generally built on 20-year timelines - a period of time that none of them has yet eclipsed - any claims to their being ghost towns are cast prematurely. To put it simply, China’s new cities are new, and the ghost city critique usually amounts to little more than an analysis of a temporary phase of development as China builds new cities for the deluge of urbanization that was intentionally set in motion.
The author is writer of Ghost Cities of China.
There will be a schooling, that is certain.
‘Dismayed by the millions of unsold homes in China’s troubled real estate market, the Chinese government is taking matters into its own hands: by buying some properties and turning them into public housing.
Ha! I predicted this a few years ago.
cool ,do you get a free skateboard in odos or wtf that place is.
Ordos. And, somewhere on the Interwebs, there’s this cool video of a skateboarding trip through the place. Total ghost town.
At the end of May, according to the National Bureau of Statistics, unsold residential floor space totaled 657 square kilometers - the most unsold space in at least two years, and covering an area nearly the size of Singapore.’
Given that Singapore is tiny, the size of NYC, that’s not saying much. Assuming 1/3 of that 657 sq km represents the common areas of the townhouses and condos typical of Chinese developments, and 200 sq m is the average housing unit, that’s only 2.2m homes.
‘It promises to be another fraught week for Chinese shares after Beijing intensified efforts over the weekend to try to shore up confidence with a frenzy of new support measures. In a little over three weeks, roughly $2.8 trillion has been wiped off Chinese shares.’
‘Rather than calming nerves, however, Beijing’s actions have not only been mostly ineffective, but they’ve also focused attention on why China is so fearful of an equity correction.’
‘This always looked too small to have much impact beyond a few hours, as stock turnover in Shanghai regularly exceeds 1 trillion yuan. The Peoples Bank of China will also provide liquidity to the state-backed margin lender, China Securities Finance, that can be used to lend to brokerages.’
‘There are precedents for state-backed stock support schemes in Asia, although the experiences of South Korea and Japan in this regard are not good, as markets there continued to slide.’
‘But perhaps there is a simpler explanation for Beijing’s extraordinary efforts to support equities: It created this bull market. Keeping it going is now seen as a test of the Communist Party’s strength, and possibly even its legitimacy.’
‘If you created the boom, arguably that also puts you on the hook for the bust. For the government, this means the fallout will not just be economic, but could also be political and social too.’
‘To get a sense of what the wider fallout from a correction could be, it helps to compare China now to its previous equity boom-and-bust in 2007.’
‘Back then, margin financing did not exist, the country did not have debt at 280% of GDP, did not have its economic growth on a sustained downtrend, and did not have three years of industrial deflation and an overinflated property market.’
‘The unknown is what the impact will be on wider confidence. Today, China looks much more vulnerable to a deflationary shock and capital destruction from an equity bust. Little wonder that Beijing feels it cannot afford to lose its battle to keep its equity bull market alive.’
‘Everyone knows the Chinese government is desperate to keep stocks from crashing. But this desperate?’
‘The regulatory tweaks aimed at supporting equities included this shocker: Homes are now acceptable collateral for borrowing to buy more stocks. Perhaps the least of the too-many-to-list problems with this idea is that property is difficult to liquidate when assets crash. The biggest is that China is sowing the seeds of a third financial time bomb to match its debt and stock bubbles.’
‘Ginning up shares with central bank liquidity and regulatory inducements, as China has already done, is a slippery slope. Tying the future of the nation’s housing sector to today’s stock mania is lunacy. Why bother letting banks churn out subprime debt instruments, as Wall Street did in the 2000s, when you can turn your whole economy into one?’
‘Memo to President Xi Jinping: Suppose some of the $4 trillion worth of debt amassed by local governments in recent years were to go sour (many already have, but you don’t do transparency). And suppose that volatility in interest rates spills over into Shanghai and Shenzhen shares (hardly a reach). That would smack one bubble into another, bursting both and triggering a third shakeout in the one Chinese asset market — home ownership — that’s not supposed to be a giant casino.’
The Chinese stock market had reached the point where its rise was starting to hurt economic growth because the Chinese like to make money and were not spending since they saw the market as a quick way to double their money. Now, that the market has entered into a bear market, money is flowing into housing:
http://www.shanghaidaily.com/business/New-home-sales-in-Shanghai-hit-high/shdaily.shtml
Crow for dinner again tomorrow and tomorrow and tomorrow?
You should be having the crow because the around 7% growth rate continues.
I’m not the one who said the Chinese government’s plunge protection measures would work, just before the stock market dropped by about another 10%.
I predicted that the market would drop by 20 to 30% and we did not even reach 30%. I predicted the government intervention would work and they could keep it below 30% so far it has. I said the market would interest me if it dropped 30% from its level on June 19th, then I said due to government intervention I would probably not have that opportunity. You can call me out when I am wrong if it ever happens but you cannot correct me when I have not been wrong.
You make up your predictions to match unfolding circumstances. Just a few weeks ago, you were proudly proclaiming how the doubling of Chinese share prices was a sign of how strong the Chinese economy was.
Does this work the other direction? For instance, does a crash of about 30% in Chinese stock prices mean the economy suddenly got about 30% weaker?
There is no contradiction. The belief that the Chinese economy was improving was the catalyst for the initial rally. However, it went too far. The Chinese government about 20% ago said it went too far and started to take measures to slow margin growth. The Chinese just like they did in housing found ways around those restrictions and borrowed more money, many times illegally. The Chinese government tightened money in the general economy more and tightened margin more. This caused the correction, however the correction threatened to move from a controlled burn of the speculators to a crown fire hurting innocent investors. Thus, the government has intervened and it has even telegraphed what level it thinks is appropriate, 4500 on the Shanghai. Anyone that wants to bet against that level is free to do it but should not be surprised that the government will get there. The stock market moved up when the world moved down. A little stability with Greece and the Chinese government will have a far easier time.
Querque: “You can call me out when I am wrong if it ever happens”
http://psychcentral.com/encyclopedia/2008/delusion-of-grandeur/
Dumb money flowing into the stock market because housing was going down. Then Shanghai housing going up because the stock market was rocketing. Now Shanghai housing going up because the stock market is crashing.
It’s a world full of magic.
It’s a world full of magic.
Yes it is, for forty years in the U.S. and now it is China’s turn for at least a couple of decades.
Now if you want to know about a country that really is in trouble it is Brazil as I have said for years:
http://www.rigzone.com/news/oil_gas/a/139462/DouglasWestwood_Brazil_In_Deep_Trouble
China won’t avoid a massive reckoning by you pointing to their little cousin. Everyone will feel the pain, more so and earlier in the resource exporters.
China won’t avoid a massive reckoning by you pointing to their little cousin. Everyone will feel the pain, more so and earlier in the resource exporters.
They have nothing in common except for the fact that Brazil’s raw materials are the first cog in China’s supply chain. While a burst bubble may be in China’s near future, the odds are good that China’s output per capita will exceed Brazil’s in the next decade.
You’re always good for a giggle, Danny boy. Don’t ever change.
does anyone have a tip on a silver/copper investment that’s not total trash ?
tia
Physical?
Everyone needs to come to terms with the fact that the lofty 2010-2015ish valuations in everything from stocks to bonds to real estate was all as fake. Those who realized it and sold into the fake bull market made a killing. Those on the sidelines for most of the time (like me) did okay. Those who bought recently are pigs to the slaughter. When the reversion to mean is well under way, I will pick up equities and real estate on the cheap.
When the reversion to mean is well under way, I will pick up equities and real estate on the cheap ??
No you won’t just like you didn’t in September of 2008 and thereafter…You will be scared $!itless just like most people and hold onto whatever cash you have…
Prices where still double then some from 2008-2012. You grossly overpaid for a depreciating asset.
http://img802.imageshack.us/img802/7812/caseshiller.jpg
I sold in 2009. My old house is still about $50k less today then it was then.
I tried to buy in 2011, could not get loan as I am self employed.
I sold in 2007, held on to the proceeds until 2011 when I tried to buy again. Had a preapproved loan and enough cash for 50%+ down but the loan was useless, my offers were ignored in favor of 100% cash speculators and flippers several times May try again after Bubble 2.0 pops and may pay cash myself, can withdraw IRA money without penalty next year and can do the same w/ 401K money now (401K funds can be withdrawn without penalty if you retire at 55+, that is not well known and many think it is also 59.5)
I had 20% down on homes in Lompoc at only $90-100k. Nada.
Now those homes are $150k. Horrible town, but I was just looking for rentals.
Any thoughts on why oil is down nearly 5% since the “NO!” vote?
The year is half over, and we aren’t getting any closer to that $80/December 2015 future price that some self-proclaimed experts have predicted.
Market Update
Oil Drops on Supply, China Market Turmoil
Published July 06, 2015
Dow Jones Newswires
John Catsimatidis: Europeans trying to undermine Greek leadership
Oil prices fell more than 3 percent on Monday after Greece rejected debt bailout terms and China rolled out emergency measures to support its stock markets, adding to concerns about demand at a time of global oversupply.
The result of Greece’s referendum put in doubt its membership in the euro, pulling down the single currency against the dollar.
A strong dollar tends to pressure commodities as it makes fuel more expensive for holders of other currencies.
Commodities were also sucked into market turmoil that has seen Chinese shares fall as much as 30 percent since June due in part to the economy growing at its slowest pace in a generation.
“Uncertainty over Greece is bearish for oil. It adds an extra negative factor on top of the turmoil in Chinese financial markets, the recent rise in U.S. drilling rigs, and a potential increase in Iranian oil supply,” said Olivier Jakob, senior energy analyst at Petromatrix in Zug, Switzerland.
Benchmark Brent crude oil fell $2.04 a barrel to a low of $58.28 before recovering a little to around $58.85 by 1345 GMT. U.S. light crude fell as low as $53.91, down $3.02 from its close on July 2. July 3 was a U.S. holiday.
…
Dollar up, oil down, however it is still trading in a range building a new base for its next leg up, the delusional articles you posted about oil dropping into the twenties are now ancient history.
Oh, no, $20 oil is still under current MSM discussion:
Energy 7/06/2015 @ 8:19AM
Oil Gets The Summertime Blues
Although the US markets haven’t opened yet (8 a.m. at this writing), oil prices in Europe and Asia have plummeted, falling 2-4% on a variety of bad news. First and foremost, the anti-austerity vote in Greece creates fear of a negative impact on the European economy, given the resulting uncertainty. And the crash in Chinese stock markets, with the Shanghai index down 30% recently, makes it look more and more as if that country might fall into a Japanese-style doldrums. The increase in the US rig count should deflate some of the warnings about a possible decline in shale oil production, and, to add injury to insult, the negotiations with Iran over its nuclear program appear likely to bear fruit, bringing another million barrels of oil a day into the market.
To some degree, the oil market is revisiting the warnings of earlier this year that prices could hit $40 or even $20, although it is early days yet. The problem is that almost all of the news likely in the next couple of months will be either bearish or only mildly bullish, suggesting that prices at best will remain under $60 and could easily move towards $40.
…
Here is a little math question to test how close we are to $20/bbl oil:
How many more days of 5% price drops would it take to get from the current $56/bbl level down to $20/bbl?
The answer is found by solving
54.21*(1-0.05)^n = 20
n = log(20/54.21)/log(1-0.05) = 19.4 days
One day down, twenty to go!
Too bad we are about a 1% decline for the day the last time I looked far off the bottom.
http://futures.tradingcharts.com/marketquotes/index.php3?market=CL
Now down 6.36%…
Did Kerry just meet all of Iran’s demands including one of Obama’s daughters.
NYMEX August 2015 contract is now down 7.62% for the day.
The trend ain’t your friend if you are betting on a return to $80/bbl oil by December 2015!
http://futures.tradingcharts.com/marketquotes/index.php3?market=CL
No future prices over $66 out to June ‘23. Your point was…?
Appears to be pricing in an Iranian deal. It does not mean a thing, I never said we would have a straight line recovery. By the next OPEC meeting the Saudis will no longer be concerned with shale oil and will want to be getting more dollars per barrel. Nothing that occurs with Iran changes the fundamentals of shale oil, to keep up production and raise it to meet increased demand you need $80 this year and $100 next year. The promise of Iranian oil only depresses oil in the short term until people realize how hard it is for them to significantly increase oil production. In the end oil will be priced at the marginal barrel and we will produce the marginal barrel.
Oil under $55/bbl will offer a great backdoor stimulus to the U.S. economy, as less money spent filling the gas tank will either result in more driving miles or will land in other categories of expenditure.
You don’t learn do you? $43 dollar was suppose to be stimulus but it was not because the cuts in the oil patch did more damage to the economy than the extra spending money consumers had. The oil patch was stabilizing with oil in the 60s, now there will be more cuts hurting the economy more than the few dollars saved at the pump.
BTW, unlike China it appears that Obama has shared news with his cronies before announcing it to the people. I would say the chance of an Iranian deal is about 95%.
At $300 a night they print cash, at $75 a night they may break even, any further cuts they close down and the jobs are lost, some stimulus:
http://eaglefordshale.com/news/eagle-ford-hotels-down-but-not-out/
Now this basically confirmation about my conjecture on Iran:
http://freebeacon.com/national-security/white-house-officials-plot-ways-to-pressure-lawmakers-into-supporting-iran-deal/
Nothing accelerates the economy like a 40% collapse in the price of oil. Nothing.
Markets Commodities Oil Markets
Oil Prices Tumble Nearly 8%
Worries over China, Greece and Iran pressure crude prices
By Timothy Puko
Updated July 6, 2015 7:44 p.m. ET
Oil prices on Monday skidded to their biggest single-day declines in more than three months, as gyrations in Chinese stocks and the prospect of more crude from the U.S. and Iran revived worries about the global supply glut.
China’s stock markets have plunged in recent weeks, which sparked worries among investors about oil demand in the world’s second-largest consumer. Iranian officials also have signaled they want to export even more crude than traders had expected if diplomats can hammer out a final deal on Iran’s nuclear program in the coming days.
These elements have taken on major importance as investors try to sort out whether the global oil market has rebalanced from a historic collapse. Prices fell nearly 60% after rapidly growing production from the U.S. shale boom overwhelmed the market. They rebounded by a third and stabilized throughout the spring as some investors bet that spending cuts would curtail production, but the latest leg down comes amid more signs that those expectations aren’t turning into reality.
The fall started late last week as U.S. producers said they wanted to ramp up production and data showed them adding drilling rigs to their fields for the first time since December. Iraqi production also turned out to be larger than expected, and data showed production across the Organization of the Petroleum Exporting Countries rising throughout June, analysts said.
“Even without additional Iranian barrels, there is already too much oil,” said Tim Evans, analyst at Citi Futures Perspective in New York. “We may have tipped the balance in the market.”
…
deregulation ??? nope reregulation))) was the driver of the Scandinavian boom of the 1980s and bust of the 1990s.’
‘Three years ago he bought a big house…When Mike bought his house, the market was already extremely high and quite unaffordable. The average home price in Toronto was over four times his and his wife’s combined annual income. So his financial situation has been tight. Then his wife was laid off a year ago. After six months she found another job, but with a big pay cut. Their household income had dropped quite a bit, and after paying all their monthly bills—mortgage, insurance, property taxes, car loans, and other living expenses—they ended up with a shortage of several hundred dollars every month.’
Loosers
Renters don’t have these problems
opposite of “tight-ers?”
Riverside, CA Housing Inventory Up 87%; Prices Fall
http://www.movoto.com/riverside-ca/market-trends/
An nearly empty French city in China. You could make a Twilight Zone episode with that: a bewildered Frenchman is somehow teleported to this strange locale, and he attempts, in vain, to communicate with the few locals, as he does not speak Mandarin and the locals, even though they live in a replica French city, do not speak French. The French styled buildings, with their Chinese signage, look like something out of a Japanese anime show.
Another city has a replica Manhattan. And there’s a Disney World knock-off too. All deserted. I don’t understand the desire to imitate to this degree; it hints at cultural insecurity.
If I was a Chinese peasant, and I was booted off my land by corrupt local officials so that a developer might build a faux Champs Elysees, I’m thinking I might not like that.
Imitation is the sincerest form of flattery.
Sign of a market top: When you get letters from people wanting you to sell your house. Just got one. Which puts me in the same category as one of my neighbors. He’s been on the receiving end of quite a few of these missives.
Meanwhile, the neighborhood F/S inventory just sits there.
My lucky neighbor also gets calls from real estate agents. I haven’t gotten any — yet.
Have friends in San Diego who, back during Bubble 1.0, had realtors knock on their door, asking if they would like to sell.
I just got one too, from a builder promising to pay “absolute top dollar.”
“Meanwhile, the neighborhood F/S inventory just sits there.”
That’s right. And it’s going to keep sitting there until prices fall to dramatically lower and more affordable levels.
What buyers?
(FXP ) up almost 10% today as a way to short China.
If you believe, you should get in on the fun. I would like other to help watch it with me. I am in for 2 yrs. And buying again to double down.
Roh roh, Shaggy! Even the MSM is worried about China.
Forget Greece. China is the real problem
http://money.cnn.com/2015/07/06/investing/stocks-market-china-greece/index.html?iid=hp-stack-dom
Instead of focusing on Athens, investors should be much more worried about what’s going on in China.
Perhaps we are wrong! As an appraiser of 30 years or so, it was always a maxiom that value is determined by price paid and received in true sales.
I was thinking that this inflation was not normal, but, never in the past, has American realestate been so desired by foreign buyers!
The damn cheaper money in the world has allowed demands to increase, and is allowing the out of country buyers to invest in the USA which seems to be a desirable place to reside when compared to some other countrys.
Unless you can limit the demand from foreign buyers the prices will continue to be affected by the increased demands from their presence, and who know when the demand will cease.
It might just be a sign of higher inflations adversely affecting the worlds economy and forcing higher prices for everything that is in demand
Well… not really. Not at all. Housing demand is at 20 year lows. 30 year lows in CA.
ironically the 10 yr dump will make for cheaper mort rates
lemmings forward !
Ashburn, VA Housing Prices Fall 9%
http://www.movoto.com/ashburn-va/market-trends/
Darn those high prices! If it weren’t for that problem, I’m sure Tianducheng would be fully occupied and swarming with tourists to boot.
Would you take hot stock tips from your hairdresser?
Markets
How Chinese Stocks Fell to Earth: ‘My Hairdresser Said It Was a Bull Market’
Having opened millions of brokerage accounts to play a rally, Chinese investors face big losses
Stock investors monitor prices in a brokerage house in Fuyang in central China’s Anhui province.
Photo: Associated Press
By Shen Hong
Updated July 6, 2015 4:11 a.m. ET
SHANGHAI—On a hot Sunday in mid-June, around 600 eager stock investors packed the largest ballroom at the Grand Hyatt in Lujiazui, Shanghai’s equivalent of Wall Street.
With Chinese stocks at a seven-year high, the investors had gathered to listen to a talk by one of China’s top fund managers, Wang Weidong, of Adding Investment. The crowd was so large, the air conditioning couldn’t keep up and hotel staffers brought in chairs and bottled water for the participants.
The Shanghai Composite Index had just hit a seven-plus-year high of 5178.19 that Friday—it closed at 5166.35 that day—and was up 162% from its low in 2014.
“The 4000 level was only the beginning of the bull market,” said Mr. Wang, citing one of a string of editorials in government-controlled media that predicted big returns. Mr. Wang ended his talk by telling the investors to cancel their holidays to ride the market. “They say the world is too big and I need to go and take a look,” he said. “I would say, the stock market is hot, so how can I leave it behind?”
Today the Shanghai index and smaller, more-volatile indexes in Shenzhen are off more than 25% from highs reached in June.
Even after the peak, new investors opened millions of brokerage accounts so they could play the rally. Sophie Wang, a 32-year-old college art teacher in Nanjing, said in a recent interview that she opened her first stock trading account two weeks ago and bought some shares on “the advice of my hairdresser.”
Ms. Wang said her holdings are down 32%. “I don’t really follow news on stocks that closely. My hairdresser said it was still a bull market and I needed to get in,” she said. She said she didn’t know what to do when the market started falling and she is still holding her shares.
Others have soured on the market after big losses. Anita Lu, a public relations executive in Shanghai, put most of her savings in Sichuan Goldstone Orient New Material Equipment Co. Ltd., a Chengdu-based pipe maker that trades on China’s small-cap ChiNext market. That was in late May when the stock was at 140 yuan ($22.86). She sold it last week at 44 yuan. “I will stay away from stocks as long as I can,” she said.
The government has shown increasing concern about the selloff.On Saturday, Beijing took its most-decisive action yet, suspending initial public offerings and establishing a market-stabilization fund to spur stock purchases. The Chinese central bank also pledged to provide funding to support brokerages’ margin finance operations that allow investors to borrow cash to buy stocks. The Shanghai index responded with a 2.4% gain on Monday.
China has suspended IPOs before in hopes of boosting the market by way of cutting supply. This time, the stakes are higher because an estimated four trillion yuan, or about $650 billion, worth of IPOs was in the works, and Beijing had hoped to use a buoyant stock market to help heavily indebted companies raise cash.
Investors have looked to Beijing since the start of the rally. After the crowd cheered Mr. Wang at the Grand Hyatt, a rumor spread among the investors that the People’s Bank of China would ease bank lending requirements later that day and the market would rally on Monday.
When the central bank didn’t act, investors began to sell, pushing the market down 2% that day.
Just as sentiment was starting to turn negative, China’s securities regulator hit the market with a flood of IPOs. The total amount of fundraising from IPOs surged to 61.4 billion yuan in June, up from 17 billion yuan in May and 11.2 billion yuan in January.
Under new rules intended to boost the returns of IPOs, offering prices had been set low, leading to huge price surges in the first days of trading. Investors eager to get into the IPOs sold off shares they already owned ahead of the deals to pledge cash to brokers in the hope of getting a piece of the IPO.
“There were too many IPOs and it locked up too much money. It was liquidity that made this bull market happen in the first place,” said Yunfeng Wu, an individual investor in Shanghai.
…
‘Chinese shares dropped almost two percent in early trading, reversing much of gains made on Monday following unprecedented steps to stabilise a plummeting market. ‘Prior to the selloff the Chinese market looked bubbly, kept rising even as the economy is slowing. It will take some time for the market to calm down,’ said Shuji Shirota, head of macroeconomics strategy group at HSBC in Tokyo. ‘Judging from Japanese experience it is not easy to support share prices just by price keeping operation,’ he said, referring to Japanese attempts in the 1990s to shore up the stock market by using public funds to buy shares.’
http://finance.yahoo.com/news/asia-shares-win-reprieve-greece-005257484.html
By telegraphing an all-out effort to pump up the market, did the Chinese financial authorities inadvertently signal panic?
ft dot com > World > Asia-Pacific >
China
July 6, 2015 12:55 pm
China sell-off threatens party credibility
Gabriel Wildau in Shanghai
A pedestrian is reflected in a glass window in front of a screen displaying share prices at a security firm in Shanghai on July 6, 2015. Shanghai stocks were up 2.15 percent at midday on July 6 after the government unveiled its biggest package of measures so far to shore up the slumping market, but an initial surge was pared as analysts questioned their effect. CHINA OUT AFP PHOTO
©AFP
An uneven recovery of Chinese stocks following official measures to halt a three-week sell-off has prompted warnings that government credibility is at stake in the performance of the market.
Economists say that while the direct spillover from the stock market to the real economy is limited, any perceived failure of government moves could dent already slowing confidence in the broader economy.
“With authorities throwing a wide range of unprecedented tools (including pensioners’ funds) at the equity market in order to prop it up, the stakes are now significantly higher,” Andrew Wood, head of Asia country risk at BMI Research, a unit of rating agency Fitch, wrote on Monday.
“A failure to stabilise the market (and indeed to achieve a notable recovery from current levels) could lead to a crisis of confidence in the heretofore infallible state apparatus.”
On Sunday China’s securities regulator said the central bank would lend from its own balance sheet to support the stock market. That marked the government’s most forceful effort yet to end the decline that has seen the main index fall 27 per cent since hitting a seven-year high on June 12.
Financial magazine Caijing reported on Monday that the National Social Security Fund had told its external fund managers they could buy stocks but were not permitted to sell them. Central Huijin, a unit of China’s sovereign wealth fund, also said on Sunday it was supporting the market by buying blue-chip exchange traded funds.
That followed a pledge by 21 securities brokerages on Saturday to spend at least Rmb120bn ($19.2bn) of their own money to buy shares, which they will not sell until the Shanghai Composite breaks 4,500. It closed at 3,776 on Monday. While the government can exert influence over mostly state-owned brokerages and fund companies, the role of retail investors adds an element of uncertainty, say analysts. Individuals owned more than 80 per cent of all shares at the end of 2014, according to stock exchange figures.
“We caution these measures are meant for short-term fix, but can’t address the fundamental problems facing China’s equity and financial system,” Li-Gang Liu, chief greater China economist at Australia and New Zealand Banking Group, wrote on Monday.
An initial burst of enthusiasm saw Shanghai’s main index open up nearly 8 per cent on Monday but confidence later ebbed. The Shanghai Composite fell briefly into negative territory in the early afternoon before closing up 2.4 per cent. The Shenzhen Composite, which is weighted towards smaller companies, ended 2.7 per cent lower after opening 6.6 per cent higher.
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The Conversation
Antipodemia
Australia and the world
China: (not) too soon to panic?
July 6, 2015 7.46pm EDT
Mark Beeson
EPA/Wu Hong
Three big lessons came out of the Asian financial crisis of the late 1990s. First, the Asian economies to our north could be a source of economic threat as well as opportunity. Second, economic crises can quickly turn into political ones, as Indonesia’s Suharto among others discovered to his cost. Third, if you’re going to panic about an economy, it’s always best to do it before everyone else does.
Given that Australian investment in China is less than 2% of total outward flows, this advice might seem somewhat redundant. Not so for a new generation of Chinese punters, however. I use the word advisedly: the Shanghai exchange in particular has become the gambling venue of choice for Chinese people with spare cash – even if it’s not actually theirs.
When people start to borrow large sums of money at high interest rates to speculate, it’s a good indicator of an unsustainable bubble that’s about to pop with potentially disastrous social and political consequences.
This would be problem enough in somewhere like Australia or the US. It’s not a good look for central bankers and treasurers to be asleep at the wheel while a bubble inflates on their watch. Just ask the formerly lionised figure of Alan Greenspan.
No matter how damaging such episodes may be, though, they are generally seen as the price that must be occasionally paid for an otherwise dynamic capitalist system.
Things are rather different in China, however. This is supposed to be the People’s Republic; the central government is supposed to have particular duty of care toward the proletariat – even a newly enriched one fired up by timelessly popular get-rich-quick mentality. It is estimated that individual investors own fully four-fifths of China’s shares, a much higher percentage than in the West where institutional investors dominate.
While fear and greed may be universal drivers of stockmarkets, the way governments manage the resultant crises isn’t. It’s important to remember that even if no-one takes socialism seriously in the Middle Kingdom anymore, threats to the supreme political authority of the Chinese Communist Party (CCP) are another matter altogether.
The authority of the CCP, even its widespread political legitimacy, is almost entirely based on its ability to guarantee rising living standards and economic security. Stockmarket crashes, widespread personal indebtedness and a possible collapse of a number of shadow banking institutions wouldn’t do much for either.
So, to borrow a phrase from Vladimir Lenin, one-time icon of the PRC intelligentsia, what is to be done? One might think managing a modestly sized – at this stage, at least – domestic crisis, ought to be a breeze for the CCP’s governing elites.
This is the country that gave the lie to the idea of a “global” financial crisis in the late 2000s. China emerged almost entirely unscathed from a crisis that saw the US teeter on the brink of another Depression and the European Union sink into an economic and political crisis from which it has never really recovered.
And yet, China’s state-led crisis management has come at a cost. Government debt continues to rise at both the central and provincial level. Much of the money spent on warding off recession went into non-essential infrastructure or further inflated an already wobbly real estate sector.
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Down.
Market Pulse
China stocks resume losing streak
By Laura He
Published: July 6, 2015 10:43 p.m. ET
HONG KONG (MarketWatch) — Chinese stocks declined Tuesday morning, returning to the loss column after the Chinese government’s drastic market-stimulus efforts led to gains the previous day. The Shanghai Composite Index SHCOMP, -2.63% opened down 3.2%, then trimmed losses but remained 2% lower an hour into the session. In Hong Kong, however, the Hang Seng Index HSI, -0.79% managed to rise 0.3%, though the mainland-China-tracking Hang Seng China Enterprises Index HSCEI, -2.38% dropped 0.7%. Helping support the Hong Kong market, airline stocks rallied on the back of plunging oil prices. China Southern Airlines Co. 1055, -2.09% ZNH, -8.66% 600029, -5.25% surged 4.3%, China Eastern Airlines Corp. 0670, -4.30% CHEAF, +4.17% 600115, -6.00% spiked 4%, and Cathay Pacific Airways Ltd. 0293, +1.04% CPCAY, -1.98% advanced 1.6%. Sino-British banking giant HSBC Holdings PLC 0005, +1.40% HSBC, -2.04% HSBA, -0.84% rebounded 1.6%, trimming its 2.4% fall in the previous session. However, bourse operator Hong Kong Exchange & Clearing Ltd. 0388, -4.09% HKXCF, -13.95% extended its losses, dropping 1.8% following a 9.6% slide on Tuesday, and facing a possible eight-day losing streak amid broad market losses and a suspension of initial public offerings. Chinese brokerage firms also continued their selloffs, as Southwest Securities International Ltd. 0812, -10.53% 600369, -8.11% plummeted 10.5%, Shenwan Hongyuan H.K. Ltd. 0218, -9.50% 000166, -5.21% sank 7%, Huatai Securities Co. 6886, -9.09% 601688, -8.23% sagged 6.7%, and Haitong International Securities Group Co. 0665, -10.50% TFSGF gave up 5.5%.
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Is a halt in trading likely to make a stock slide better or worse?
Market Pulse
Over 20% of listed China stocks now in trading halt
By Laura He
Published: July 7, 2015 12:24 a.m. ET
HONG KONG (MarketWatch) — Amid a heavy market selloff, 203 mainland-China-traded companies announced separately Tuesday that trading in their shares had been suspended. This brought the total number of shares in trading halt over the past seven days to 651, or about 23% of the entire pool of 2,808 listed stocks, the Securities Daily reported Tuesday. Many of the companies didn’t reveal the reasons behind the trading suspensions, though some cited reasons including the consideration of unspecified significant events, asset restructuring, or private share placements, the report said. Many market observers saw the exodus into trading halts as a way for companies to protect their stocks from the current sharp drop for Chinese markets, according to the report, with the Shanghai Composite Index (SHCOMP, -1.75%) having plunged 12.1% last week. Reuters reported separately that the companies would face fines if they were discovered to have requested trading suspensions without good reason. Among the 615 issues, 37% came from the Shenzhen Stock Exchange’s Small and Medium-sized Enterprise board (SME), while more than 22% were from the ChiNext (399006, -5.73%) index of start-ups, according to the the Securities Daily.
Worse.
DON’T PANIC!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
Radio Free Asia
Home | News | China
‘Don’t Panic,’ Say China’s State Media, Amid Ongoing Market Mayhem
2015-07-06
Cartoon by RFA cartoonist Rebel Pepper, July 6, 2015.
The ruling Chinese Communist Party used its official media outlets to crank up positive propaganda surrounding the country’s plummeting financial markets on Monday after a government intervention over the weekend, amid warnings that online “rumor-mongers” will be detained.
“Firm confidence instead of panic should be held for China’s capital market as market risks are within control and fragile market sentiment will be reversed,” the party’s official People’s Daily newspaper said in an editorial on Monday.
In a bid to reassure investors that tumbling share prices are a top priority for the government, the paper said that China has “sufficient tools” to stem the carnage, that saw the benchmark Shanghai Composite Index fall by nearly 30 percent in the past three weeks, with some 12 percent of its value lost last week.
“China has sufficient tools to bring the stock market back to sound footing as the economy keeps improving and the liquidity remains abundant,” the People’s Daily said.
It said the government is now engaged in “emergency and supportive measures to stabilize market sentiment.”
The official Xinhua news agency chimed in with similar wording aimed at rebuilding shattered confidence, as investors took cover in the country’s over-supplied property market.
“China remains confident to achieve a stable and sound development of its capital market as a raft of supportive measures is expected to smooth out the stock market volatility,” the agency said in an opinion article on Monday.
“Though the recent losing trend in the stock market has rattled investors, pessimism about the future is uncalled for,” the article said.
Pointing to government measures to cut new share issues and put pressure on major brokerages to buy up shares, with interest cuts and easier credit promised by the central bank, the article said the market will “be back on [a] sound footing.”
Propping up markets
The authorities have persuaded the country’s biggest brokers to help prop up the markets, with 21 major securities firms pledging to pump no less than 15 percent of their total net assets into tracker-style funds.
Under the measures, 28 Chinese companies that had initial public offerings (IPOs) approved and in the pipeline said they would postpone any further tranches of new shares.
The authorities have also stepped up a crackdown on online posts linked to market movements, with the China Securities Regulatory Commission announcing probes into three cases of “rumor-mongering” on Friday.
The rumors were specifically linked to “incorrect” social media posts and retweets of reports that people had killed themselves in connection with the plunging markets, and the police have placed three people under criminal detention, according to an official police posting on social media.
The media had “exaggerated” reports of suicides linked to financial losses, and had failed to confirm reports that it received, leading to further market instability, the CSRC said.
“They are trying to investigate rumors so that people won’t dare to pass on news online of people who committed suicide because of the stock market,” Hebei-based veteran journalist Zhu Xinxin told RFA on Monday.
“Actually, there have been suicides of people jumping from buildings that they haven’t reported on.”
China’s State Administration of Press, Publication, Radio, Film and Television (SAPPRFT) has already issued a directive warning broadcasters to play down reports related to the stock markets.
“No commentaries or expert discussions or live reports from the scene, no in-depth analysis or conjectures or evaluations of the direction of the stock markets are to be arranged,” the directive said.
“There is to be no atmosphere of panic or gloom, and sensational language like ‘crash,’ ‘boom’ and “‘collapse’ are not to be used,” it warned.
Zhu said the government is basically afraid of any information that could prompt any sort of extreme reaction.
“They are basically afraid of any kind of social disturbance, which could lead to the collapse of the entire stability maintenance system,” Zhu said.
Historically, large falls in the stock markets have triggered wider social movements and threatened political regimes, he said.
But he said the government’s efforts to shore up the markets may not have much effect.
“The stock market doesn’t work like that,” Zhu said. “They can’t rely on their [political] power to force the financial markets to bounce back.”
He said the optimism that once prevailed among the country’s army of individual investors is no longer there.
“People no longer have any sort of illusions about the Chinese Communist Party; it’s not like it was a few years ago,” Zhu said.
“People will make up their own minds independently of what they do, and they won’t blindly follow the government’s directions.”
No trust in state media
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China
China Steers Toward a Subprime Economy
72 Jul 6, 2015 12:01 AM EDT
By William Pesek
Everyone knows the Chinese government is desperate to keep stocks from crashing. But this desperate?
The regulatory tweaks aimed at supporting equities included this shocker: Homes are now acceptable collateral for borrowing to buy more stocks. Perhaps the least of the too-many-to-list problems with this idea is that property is difficult to liquidate when assets crash. The biggest is that China is sowing the seeds of a third financial time bomb to match its debt and stock bubbles.
China’s Debt Bomb
Ginning up shares with central bank liquidity and regulatory inducements, as China has already done, is a slippery slope. Tying the future of the nation’s housing sector to today’s stock mania is lunacy. Why bother letting banks churn out subprime debt instruments, as Wall Street did in the 2000s, when you can turn your whole economy into one?
Memo to President Xi Jinping: Suppose some of the $4 trillion worth of debt amassed by local governments in recent years were to go sour (many already have, but you don’t do transparency). And suppose that volatility in interest rates spills over into Shanghai and Shenzhen shares (hardly a reach). That would smack one bubble into another, bursting both and triggering a third shakeout in the one Chinese asset market — home ownership — that’s not supposed to be a giant casino.
The good news is that many securities companies may resist betting the house on the market, or at least as much as they can in top-down Communist China. Why welcome such a risk-management nightmare in a nation that already has too many ghost cities? The wording of China’s new rules — and its list of “other assets” that can be used as collateral — will force brokers to become experts in valuing everything from property, to antiques, to art.
The bad news is that the authorities in Beijing clearly are betting everything on a stock rally that’s hasn’t come: Stocks just sustained their biggest three-week loss in more than two decades. That’s despite moves last week to loosen margin lending, cut interest rates, reduce reserve requirements, direct the state-run media to churn out don’t-panic articles, you name it. Over the weekend, the government even suspended initial public offerings and set up a market stabilization fund.
Margin traders, who increased their leveraged investments nine-fold in the last two years, to about $322 billion from $35.7 billion, have been rushing to close those positions for a record nine consecutive days. And the Shanghai Composite Index’s plunge below the symbolic 4,000 level signals even more selling. Further, a slide in iron-ore prices last week suggests that Chinese demand is slowing more sharply than the government is letting on.
All of this indicates that the government’s recent stimulus efforts aren’t working. At a time when Xi’s team should be strengthening China’s financial system, they’re just making it more fragile. What’s needed are decisive steps to shore up domestic demand, not more market froth.
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