A Prosperity Cycle Based On Credit
Reuters reports on China. “Home sales in the red-hot property markets of Shanghai and Shenzhen tumbled sharply in the week after authorities made it tougher to buy homes in the cities to prevent a property bubble, surveys by a major Chinese realtor show. After Shenzhen and Shanghai property prices had jumped 57 percent and 20.6 percent in February from a year earlier, local governments tightened downpayment requirements for second homes and raised the eligibility bar for non-residents to buy in the cities.”
“In the week beginning March 28, the first after the new rules took effect, the total floor area sold in Shanghai fell 60 percent from the previous week to 283,600 square metres, according to nationwide agency Hopefluent Real Properties (China), whose surveys are based largely on government data. Shenzhen sales fell 28.2 percent to 71,000 square metres.”
“Prices also eased 3 percent week on week in Shanghai and 4.2 percent in Shenzhen, according to the surveys. ‘A lot of people don’t want to get into the market now, so they’re not buying. This is giving me a headache,’ said 56-year old Ding Xiaoping, a furniture salesman who is trying to sell two of his apartments. ‘Many sellers are thinking about cutting prices. I’m thinking of lowering the price by a little, too.’”
“‘China’s property investment in the first two months was doing better than our full-year forecast of a 5 percent drop,’ Nomura chief China economist Zhou Yang told Reuters. ‘We expect both sales and investment in the coming two quarters will remain robust, but the second half is likely to ease on housing recovery slowdown, affected by tightening in the first tiers and glut in the third and fourth tier (cities).’”
The South China Morning Post on Hong Kong. “Recent poor sales at some private residential projects as well as a subsidised development indicate rich and not so rich homebuyers are staying out of the market, pushing up expectations that a price correction could accelerate. On Saturday, Mantin Heights in Ho Man Tin, built by Kerry Properties, became the third private project to see disappointing sales, with just 31 per cent – 34 units out of 108 – sold at the luxury residential project in the first two days following their launch.”
“Wong Leung-sing, associate director of research at Centaline Property Agency, said the failure of the subsidised housing project to drum up sales despite being offered at affordable prices would negatively affect overall market sentiment. ‘The majority of these eligible buyers decided to abandon their purchase rights as they expect home prices will fall further,’ he said.”
“Flats at De Novo were offered at 20 per cent discount to prevailing market prices. In the private residential market, defaults have been rising for both mass-market and luxury homes, especially in Ho Man Tin and Yuen Long. ‘But developers did not slow down the launch pace,’ said Alfred Lau, a property analyst at Bocom, adding they had instead opted to offer more favourable terms and prices in an attempt to attract buyers. ‘We believe developers will accelerate turnover even at the cost of lower margin, rather than sitting on the land bank, given the abundant pipeline and pessimistic outlook,’ he said.”
“Individual owners have joined the price cuts in a bid to speed up sales. with more secondary market transactions concluded at bargain prices. Herman Po, a senior sales manager at Hong Kong Property’s Taikoo Shing branch, said a 598 sq ft unit at Po Shan Mansion, Taikoo Shing, had changed hands for HK$7.8 million, or HK$13,043 per square foot. ‘The vendor offered the unit for HK$9 million in December but only found a buyer after reducing the asking prices by HK$1.2 million,’ he said.”
The Epoch Times. “China has a huge real estate bubble, yet Chinese economists and the government still don’t seem to have a clear understanding of the damage, and continue to infuse more credit into sectors related to real estate. New loans of 2.51 trillion yuan ($387 billion) have been issued in January, the highest single month on record, and the growth rate of M2 monetary supply increased 14 percent, the highest in 18 months, according to data released by China’s Central Bank.”
“The majority of these loans went to individual mortgages, affordable housing developments, land development, government projects, transportation, and wholesale and retail trade —with three areas directly related to real estate. So, who are the buyers of expensive real estate in major Chinese cities? One businessman, who has bought dozens of houses, said the price of real estate in first-tier cities has skyrocketed because rich bosses have closed their companies and factories and have invested cash in real estate. Running a real business is extremely tiresome, full of risks and responsibilities, and profits are less than gains from real estate investments, he said.”
“According to Ren Zhiqiang, the Chinese real estate mogul whose remarks recently brought down official wrath, the Chinese real estate market is designed to build houses for the rich, so they can buy houses for investments. In other words, this round of China’s real estate upsurge is not because of an actual demand for housing, but solely because of speculation by rich people with few investment opportunities.”
“However, regardless of the reason, when houses are sold, the government makes money from selling land, banks earn interest from loans, and real estate companies make commissions. It is a prosperity cycle based on credit. As long as banks continue to provide loans, those with money can make use of it and play the investment game.”
“Overall, long-term high real estate costs have a detrimental effect on business, reduce urban employment opportunities, and reduce government revenue. Pouring more credit into the real estate sector has only further inflated the bubble and broadened the wealth gap.”
“When poor people have trouble making ends meet and hope for lower rents, does it make sense to lend money to the wealthy to speculate and make a big fortune in real estate? When small and medium enterprises need funds to maintain their operations, does it make sense to pump money into the real estate sector that will hike up the costs for small and medium enterprises? Real estate speculation does not improve the economy or the lives of the majority of people.”
‘Divorce filings are increasing at several marriage registration offices in Shanghai as families are trying to avoid tougher home purchasing regulations since the city rolled out its strictest ever property control measures last month, Beijing Youth Daily reported.’
‘Over two weeks after the new policy took effect, Shanghai’s runaway property market seems to have been cooling down with home prices stabilizing and public panic receding.’
‘Under the new policy to tame soaring property prices, local families with one property have to pay a minimum 50 percent down payment for a second home, with the down payment raised to 70 percent if the house is either above 140 square meters or priced above 4.5 million yuan (US$692,000) located within the inner ring.’
‘This has particularly affected local families with multiple houses in hopes of buying more.’
‘Real estate agents in the city’s Lujiazui financial districts advised a married woman with two houses to “divorce” her husband in order to buy another one. After the couple’s proposed breakup, their two existing houses could be registered under the woman’s “ex-husband,” allowing her to buy a new one as her first home, with a lower tax and down payment. They can then remarry after the new property is registered under her name.’
‘Couples are advised to come to the office one hour earlier to avoid a long queue, said a staff member from a local marriage registration office in the city’s Pudong New Area.’
“We couldn’t tell whether they are ‘fake divorcing’ or not, but I’m sure some of them are,” said a staff member from the office in Shanghai’s Xuhui District who also has seen an increase in divorce applications since the new home restriction. “I guess that couples who are laughing and talking during the process don’t come here seriously.”
‘Other cities like Tianjin and Langfang, both near China’s capital city Beijing, are also reported to be witnessing a soaring divorce rate amid a home-buying frenzy.’
Reports like this have me wondering about the intelligence of these people. Not to mention the greed and deviousness.
the greed and the deviousness
Loanowners are the penultimate FSA, always crowing about their imaginary equity.
Equity is a fallacy. It doesn’t exist.
Reports like this have me wondering about the intelligence of these people. Not to mention the greed and deviousness.
And you have to wonder about the wisdom of buying real estate in a nation that is not only a dictatorship, but is still officially a Communist society. What happens when the next “dear leader’ and his politburo decide to change the rules?
“So, who are the buyers of expensive real estate in major Chinese cities? One businessman, who has bought dozens of houses, said the price of real estate in first-tier cities has skyrocketed because rich bosses have closed their companies and factories and have invested cash in real estate. Running a real business is extremely tiresome, full of risks and responsibilities, and profits are less than gains from real estate investments, he said.”
So the leaders of productive enterprises in China are abdicating their managerial duties in order to cash in on the Chinese real estate investing bonanza? I suppose this makes perfectly good sense in a world where Chinese real estate always goes up.
‘Running a real business is extremely tiresome, full of risks and responsibilities, and profits are less than gains from real estate investments’
Moral hazard?
Work is hard. In some ways I’m amazed that the ChiComs were able to turn China into the “World’s Factory”, that is until I see how they destroyed their country in the process, turning it into a polluted, unhealthy mess. You don’t have to be very competent when your employees work for peanuts and factories can pollute to their hearts content.
Remember the wind farm that didn’t have anything to connect to? When I would clean out a foreclosure, I got to where I threw away a lot of the hand tools the FB’s would leave behind. Most of it was made in China junk.
“When poor people have trouble making ends meet and hope for lower rents, does it make sense to lend money to the wealthy to speculate and make a big fortune in real estate? When small and medium enterprises need funds to maintain their operations, does it make sense to pump money into the real estate sector that will hike up the costs for small and medium enterprises? Real estate speculation does not improve the economy or the lives of the majority of people.”
Given that it worked so well in the U.S., why wouldn’t it work equally well in China?
Are you positioned for the next leg down in oil prices?
Markets Commodities
Oil Markets
Oil Prices Fall on Bearish U.S. Supply Data, Doubts on Production Cuts
Pessimism mounts over prospects for agreement among sovereign producers to curb output
By Christian Berthelsen
Updated April 13, 2016 3:22 p.m. ET
U.S. and global oil benchmarks fell Wednesday amid bearish surprises in weekly U.S. crude supply data and mounting pessimism about prospects for an agreement among sovereign producers to curb output.
Both major contracts spent most of the day in the red, pulling back from 2016 highs the day before. The U.S. benchmark fell 1% to $41.76 a barrel on the New York Mercantile Exchange, while the global Brent contract fell 1.1% to $44.18 a barrel on the ICE Futures Europe exchange.
The U.S. Energy Department said domestic oil inventories rose 6.6 million barrels last week, far more than the 1.8-million barrel increase projected by analysts. The report also said imports of foreign oil jumped last week and refinery demand slowed.
After touching multiyear lows earlier this year, crude prices have surged in the expectation that producers would begin to curtail output to alleviate a global oil glut and prompt a price recovery. That evidence is finally starting to emerge in Latin America, Asia and even the U.S., where the Energy Department said Wednesday that oil production fell below 9 million barrels a day for the first time since September 2014.
But there is still a long way to go. The surprise increase in U.S. oil inventories brought commercial stockpiles to more than 536 million barrels, setting a new modern record. And after early optimism that a meeting of members and nonmembers of the Organization of the Petroleum Exporting Countries in Doha, Qatar, this weekend would yield an output freeze agreement, skepticism is mounting that a deal will be reached or that it will have a meaningful impact.
…
I am seeing something I haven’t seen in ages: gasoline prices dipping in April. This is normally the time when prices skyrocket. Regular was pushing $2 a few weeks ago, now it’s back down to the $1.80’s.
Opinion: Why this market rally looks like a classic investor trap
Published: Apr 14, 2016 5:20 a.m. ET
Currency and economic risks weigh heavily on stocks
By Med Jones
The U.S. stock market’s rally from the worst first-quarter performance since 2008 appears to be a classic investor trap.
Many investors have the tendency to jump in a bit too early on first signs of improvement in economic indicators or positive news. But the markets are primed to trap the solvent investors and fool the most rational among us.
…
“56-year old Ding Xiaoping, a furniture salesman who is trying to sell two of his apartments. ‘Many sellers are thinking about cutting prices. I’m thinking of lowering the price by a little, too.’”
Mr. Strawberry Picker, er, I mean Mr. Furniture Salesman, you are about to get the lesson of your life, you are eventually going to lower the price by a LOT, way more than you ever imagined, if you wait long enuf, below the price you paid.
Sum Ting Wong.
‘When poor people have trouble making ends meet and hope for lower rents, does it make sense to lend money to the wealthy to speculate and make a big fortune in real estate? ‘
‘China’s ‘Fake’ Cities Are Eerie Replicas of Paris, London’
‘“I think [it’s] a little strange,” Rachel Ni, who moved to Tianducheng six years ago, told ABC News’ Nightline. “I don’t like it here.”
‘Unlike the real Paris, laundry hangs in full view everywhere in Tianducheng, even on trees, and the fountains are dry. Many apartments are empty, and few stores are even open for business. To Ni, her view of the fake Eiffel Tower is embarrassing. “No people will think it’s cool, no people. And some people, I think, want this removed. It’s fake. It’s not the true [one],” Ni said.’
‘Tianducheng is not the only place in China where architecture has been copied from a different country. Two hours away in the Chinese city of Suzhou, known for its unique architecture and waterways, there are dozens of duplicated bridges, including a version of Paris’ Pont Alexandre III and a mutated clone of London’s famed Tower Bridge, featuring four towers instead of two.’
‘And outside of Beijing, past the Great Wall, there is a version of Jackson Hole, Wyoming, complete with cowboys, a church and Route 66 (which doesn’t actually run through the actual Wyoming). And China’s Jackson Hole homes have sold well. Realtors showed Nightline a home that cost almost $2 million because it’s only about an hour and a half away from the Chinese capital.’
‘When the Chinese economy started to skyrocket in the early 1990s, people wanted a new house to make them feel successful, so they duplicated architecture from other countries. Author Bianca Bosker calls this phenomenon “duplitecture.”
“China’s copycat and ‘duplitecture’ enthusiasts have chosen a very specific range of styles and countries to copy. Among the options, there is no Cleveland town. The cities and landmarks we see copied over and over again in China are those associated with countries and cultures that oftentimes command a lot of influence and often a lot of wealth,” Bosker told “Nightline.” “These ‘duplitecture’ developments have become so embedded in parts of Chinese culture that I was surprised to hear…this idea that the way to live best was to eat Chinese food, drive an American car and live in a British home.”
‘Not all of these developments, however, are drawing large numbers of residents. And recently, the Chinese government announced that these knock-off cities are “at odds with Socialist core values” and says it wants to rename them.’
‘In the suburbs of Shanghai, there is a place called Thames Town, which is modeled after London. Besides its Tudor architecture, Thames Town has a Harry Potter statue, a Winston Churchill statue, the iconic red phone booths and security guards dressed in British uniforms. Thames Town was supposed to be busy and filled with residents, but since they never came, it’s now mostly used for wedding photos.’
‘“There is not an endless appetite and insatiable demand for more and more housing, apartments and so forth. In that regard I think these duplitecture developments are part of the wakeup call to the Chinese government that that idea of ‘build it and they will come’ that they have been able to rely on is no longer perhaps going to stay true,” said Bosker.’
The photos are amazing.
It’s pretty funny that the fake Eiffel Tower is nearly obscured by smog.
lemme post this here……….anyone can get credit…..on a used car…seriously
http://www.sensibleautolending.com/index.php
ahhhhhhhh but the catch……..its a good one……….
http://www.sensibleautolending.com/disclosures/GPS-Connecticut.pdf
I was in a bank the other day. They had a sign up encouraging you to refinance your car.
“Realtor Convicted In Real Estate Scam”
http://www.indystar.com/story/news/crime/2016/04/07/former-indy-realtor-convicted-real-estate-scam/82757450/