2009 Investment in China's real estate as much as than the rest of the world combined?

[touchring]

Re: 2009 Investment in China's real estate as much as than the rest of the world combined?

I get that much, as said, I'm in RE here.
I'm more curious about your prediction in timing

Actually, I'm not making any prediction, I'm just following what the Chinese government announced they are going to do and i never doubt that they will achieve what they are going to do.

Do you know China banned emails, the Internet and curbed the use of phones in Xinjiang, a province the size of Western Europe, since July last year, and till today, the Internet ban is practically still in place - http://74.125.153.132/search?q=cache...&ct=clnk&gl=sg

Texting has been just been restored early this year.

http://news.oneindia.in/2010/02/26/h...eadingrum.html

[GRG55]

Re: 2009 Investment in China's real estate as much as than the rest of the world combined?

I get that much, as said, I'm in RE here.
I'm more curious about your prediction in timing

I gather that you are "in real estate" in China? Are you able to share in which city or region? Hong Kong or mainland?

Many of us are watching the situation in China with extraordinarily keen interest, and having more iTulipers witnessing what is actually happening on the front lines is of real interest to us.

As for timing, my sense from previous experience, is that things run longer than knowledgable observers often expect, the situation almost always gets to unimaginable extremes [price, rationalizations for why it will never end, etc.] and even when the inevitable bust finally arrives, many of those who most benefitted from the bubble remain in denial for an extended period of time [and that includes bankers and certain government officials, not the bankrupt developers and newly unemployed construction workers].

Dubai was a crack-up of unimaginable proportions. The dust hasn't settled and the negotiations between lenders and borrowers to allocate the meat scraps have barely started, yet the media in the region are already calling "the bottom" and running glowing articles of the "recovery" in Dubai real estate...it's all so predictable now...:rolleyes:

[c1ue]

Re: 2009 Investment in China's real estate as much as than the rest of the world combined?

The dynamic in China is the yuan.

Between implicit and explicit capital controls, many individuals and investment groups look to buying real estate as a proxy for the yuan - which is a very very crowded trade to 'inevitably' rise.

[touchring]

Re: 2009 Investment in China's real estate as much as than the rest of the world combined?

The dynamic in China is the yuan.

Between implicit and explicit capital controls, many individuals and investment groups look to buying real estate as a proxy for the yuan - which is a very very crowded trade to 'inevitably' rise.

Anything can happen in China. There are no rules. If they can ban internet, email and phone in Xinjiang for almost a year, should there be signs of unrest in China proper, they will do the same in Shanghai and the entire country for 3 months. The Chinese Communist party cannot be challenged, at all costs, not even the lives of innocent people on the streets, let alone mere investor money.

Any investor should be mentally prepared if such a thing happens.

[Sharky]

Re: 2009 Investment in China's real estate as much as than the rest of the world combined?

haha yeah,

honestly, I'd hate for superinflation or something happening to the currency.
But I wouldn't mind an asset bubble burst, I'd actually really embrace it, I cashed out of the RE market, and have stayed cash since.
BOO Gold, no touch stocks either anymore.

but with commie party in place, I just don't see it happening, I tell you, if the bubble would burst significantly, you'd have bigger problems than investment losses here.

You're assuming the communist party officials could stop a collapse if they wanted to.

That's simply not correct. They can ignore reality for a while, but it will eventually catch up to them, regardless of what they want or don't want.

[touchring]

Re: 2009 Investment in China's real estate as much as than the rest of the world combined?

You're assuming the communist party officials could stop a collapse if they wanted to.

That's simply not correct. They can ignore reality for a while, but it will eventually catch up to them, regardless of what they want or don't want.

Theoretically, they can stop any collapse - by closing the market. if you can't sell and can't buy, there won't be a collapse.

[we_are_toast]

Re: 2009 Investment in China's real estate as much as than the rest of the world combined?

Nice report on Calculated Risk by Michael Kleist about this.

http://www.calculatedriskblog.com/20...-in-china.html

...
News of soaring housing prices in China, which are now hovering around late 2007 peaks, naturally invites talk of bubbles and excessive speculation. More so, since the 2007 highs led to a humbling drop in prices for homeowners and investors in 2008. Are things heading that way again in 2010?

Not necessarily.
...

When in early 2009, in response to the economic crisis, the China government launched its stimulus package it also stoked the property market by once again loosening lending regulations and lowering taxes and fees for both developers and home buyers. Builders began building and people began buying homes again. As a result, prices naturally began to go up.

What we are seeing today is that with fewer homes on the market after a nearly 2 year lull in building, the prices have continued to climb.

This imbalance will likely even out as the homes started in 2009 become available for sale. Most likely, this will result in a stabilization of prices but not a bursting bubble because it’s not even clear there is a housing bubble in China.

Certainly there isn’t a mortgage credit-related bubble. The majority of homes in China are purchased with down payments between 30-40%, which is required by the banks, and nearly 25% of homes are purchased with all cash. Only those qualifying for low-cost housing can purchase a home with a minimum down payment as low as 20%. For this reason foreclosures in China are practically nonexistent.

In addition, the majority of home buyers in China are still either first-time buyers or upgrading their home. Only an estimated around 20% of home buyers in China are pure investors. As with any statistics coming out of China, this figure can be questioned, but regardless, if investors are speculating, they are doing it with large cash down payments.

...

With regard to the bursting side of this question, two things to keep in mind are the tremendous amount of influence the China government has to manipulate the housing market (both up and down) and its strong desire to keep prices stable or rising comfortably without squashing the market like it did at the end of 2007.

The central government in China has multiple tools at its disposal to directly impact the market. This begins with its control over all of the country’s commercial banks. When the Party tells banks to increase or adjust lending there is an immediate response. That’s one reason why the country was able to recover so quickly from the world credit crunch. The government uses this blunt tool when it feels there is a need for a country-wide impact on lending.

More subtly, it can direct banks to adjust mortgage rates or down payment percentages in specific locations that seem to be heating or cooling, it its mind, at an unreasonably pace.

One of the government’s most effective tools against speculation is to raise the down payment ratio and interest rate for buyers with an existing mortgage trying to purchase a second home. Currently, in Shanghai any buyer of a home with an existing mortgage is required to have a minimum down payment of 40% and must pay a higher interest rate on the loan than a first time buyer or buyer without an existing loan. This is a very effective approach that targets speculators without affecting the rest of the market and can be applied locally. In some locations, banks are forbidden to approve any second home loan until the first loan is paid off.

The point here is that as long as China’s government acts by tapping the brakes when and where necessary, a precipitous drop in home prices is unlikely. This assumes the government has learned from its mistakes in late 2007 when it adjusted too hard.

[nicmakaveli]

Re: 2009 Investment in China's real estate as much as than the rest of the world combined?

Do you know China banned emails, the Internet and curbed the use of phones in Xinjiang, a province the size of Western Europe, since July last year, and till today, the Internet ban is practically still in place - http://74.125.153.132/search?q=cache...&ct=clnk&gl=sg

Texting has been just been restored early this year.

http://news.oneindia.in/2010/02/26/h...eadingrum.html

Yes, I do have friends in the region, most recently a japanese woman who has been pro independence for xinjiang was turned right away at the airport (beijing I believe).

[nicmakaveli]

Re: 2009 Investment in China's real estate as much as than the rest of the world combined?

I gather that you are "in real estate" in China? Are you able to share in which city or region? Hong Kong or mainland?

Many of us are watching the situation in China with extraordinarily keen interest, and having more iTulipers witnessing what is actually happening on the front lines is of real interest to us.

As for timing, my sense from previous experience, is that things run longer than knowledgable observers often expect, the situation almost always gets to unimaginable extremes [price, rationalizations for why it will never end, etc.] and even when the inevitable bust finally arrives, many of those who most benefitted from the bubble remain in denial for an extended period of time [and that includes bankers and certain government officials, not the bankrupt developers and newly unemployed construction workers].

Dubai was a crack-up of unimaginable proportions. The dust hasn't settled and the negotiations between lenders and borrowers to allocate the meat scraps have barely started, yet the media in the region are already calling "the bottom" and running glowing articles of the "recovery" in Dubai real estate...it's all so predictable now...:rolleyes:

I'm in Shanghai, i'm in the local on the ground kind of business, we hang around lot's officials, and we did a lot of flipping here.

I actually disagree with one thing, but i'm quite ignorant and don't have any formal education, so please be gentle.

I think china, is way freer in terms of business than it might seem to the outside world.
You can do anything, and that needs the right connections, but you can get to them, you just have to be willing to accept the system and flow with it.

That's not really just RE, it's in all business, and I find it easier.
I grew up in europe, and back home is just way to much regulations and forms you have to go through to set up.
In china, you find a guy, who knows a guy, whos married to the sister of a girl who is the daughter in law to the official you need to talk to and your set.
More or less.

[nicmakaveli]

Re: 2009 Investment in China's real estate as much as than the rest of the world combined?

You're assuming the communist party officials could stop a collapse if they wanted to.

That's simply not correct. They can ignore reality for a while, but it will eventually catch up to them, regardless of what they want or don't want.

I should have been more precise.
I'm presuming, that they have the power to keep it going for within my entrepreneurial lifetime.
I don't really care what happens after that.

[touchring]

Re: 2009 Investment in China's real estate as much as than the rest of the world combined?

I should have been more precise.
I'm presuming, that they have the power to keep it going for within my entrepreneurial lifetime.
I don't really care what happens after that.

And how long will that be? You know China is still a communist economy, even though small pockets of it like the export sector and new residential real estate are based on capitalism.

Communist rulers never like to lose control of their economy because the economy is always second to them maintaining sole control of the country.

China is not like the West. In the West, when there's a bad recession or a depression, people become unemployed, ok, so what's the big deal??

In China, when there's a more than serious recession, outer provinces break into chaos like what happened in Xinjiang, and Gansu last year, troops with machine guns sent into the streets, Internet, mobile phones, and international calls banned. If there's a depression, most probably troops will also have to be deployed on the streets of Beijing and Shanghai... you may imagine the rest.

[Sharky]

Re: 2009 Investment in China's real estate as much as than the rest of the world combined?

Theoretically, they can stop any collapse - by closing the market. if you can't sell and can't buy, there won't be a collapse.

If you can't buy or sell, that is the collapse.

Just because markets are closed doesn't mean prices don't change. Over a longer term, the value of things I can't trade rapidly approaches zero.

I should have been more precise.
I'm presuming, that they have the power to keep it going for within my entrepreneurial lifetime.
I don't really care what happens after that.

Are you only planning to be in business for the next few months? What will you do after that? Leave the country?

[nicmakaveli]

Re: 2009 Investment in China's real estate as much as than the rest of the world combined?

If you can't buy or sell, that is the collapse.

Just because markets are closed doesn't mean prices don't change. Over a longer term, the value of things I can't trade rapidly approaches zero.

Are you only planning to be in business for the next few months? What will you do after that? Leave the country?

Ok, I tried to write this differently, but it was a lot of babble.

If the whole thing tanks, and we have a depression and everything will stop, I'll probably leave the country.
But I welcome a small downturn, I love the opportunity they create it's the power of being cash rich. We could live through a few years without changing our lifestyles without having any income.

Chinese people are cash rich, it's really difficult to explain, but especially since last year, a lot have a lot more cash.
They don't buy anymore, they wait, they do this everytime.

And these aren't small fish, there is a lot of people with hundreds of millions, that nobody knows about, because it's all "tax-free".

They've been itching, and they're uneducated, but they understand the general game of china, buy low, sell high.
Everyone who played the cash money game here succesfully knows it's too high right now.
So they wait.
I have a friend, who we helped flip a lot of houses in the last five years come to me and say, man, I have like 7 hundred million in the bank, when the heck is this market going to go down? He didn't buy since summer 08, and they sold like 10 of his places in 09.
He didn't even go to little school, doesn't know how to write, and comes from a hell poor farming family.
But he knows when to keep his hand in the pocket.
There is so many people like this I know, I just picked him out cuz they got the most money.

But there is also so much cash here that never shows up in the reports (well we can't believe them anyway), it's all cash.

I know people who trade steel, go to hongkong, sign a contract and bring several 100k$ back in cash.
Big western companies still bribe manufacturers to put up higher prices on contracts, and shipping bills.
Real estate for profit almost always write a lower purchase price do duck tax, the rest is cash, no loan, just cash, from one hand to the other.
I doubt, any retail, or restaurant in china reports how much they make, they all pay min. tax for sure, they'd be stupid not to.

I don't think any government owned company can fail.
Because government has cash.
If the small companies here fail, they're always people, waiting on the sideline with lot's of cash to scoop up bargains.

It's usually what'll widen the gap between rich and poor, it's the middle class, usually the most educated, chasing the bubbles, the rich sell out.

Oh wow, not a short post,

I'm not arguing with you that this isn't high, as said, I cashed out too, and I'm not going to buy again until stuff comes down, when I see an opportunity, I probably like many others who waited won't need loans or whatever, so credit really doesn't matter, the interest rats are so high, they'd cripple any profit anyway.

And in my circle, I lost out, a lot, because I was always expecting a bubble burst in the beginning.
Now, I know, if you keep enough cash, a downturn won't matter, and because lot's of people keep a lot of cash, an implosion won't happen, at least not in the near term, for now it'll just be, middle class speculated wrong and rich buy again, then it goes around in circle for few years and repeat scenario.

Like china's car numbers.
I see the government as funny enough to actually buy hoards of cars, I would really believe they're ridiculous enough to do it.

But, we heard the argument here too, recently talked about it.
Abroad, you have tax every year, and stuff, for your car. So it makes sense to switch.
There is no tax here, except the purchase tax.
So people just park the 2nd, or 3rd car somewhere else.
Trust me, who buys a car, can afford it and has lot's of cash too.
And it's because the speculation is so dry that they might buy cars, I know lot's of people who bought a few these few months.

Most don't even drive it anyway.

So unless you multiply the drivers, there won't be more people driving the cars, there will be no increase in gasoline from them.
Did you know that the motorcycles who used to grace our streets are all more or less gone in the last year or two?
They all switched to natural gas and electricity. Mainly Gas though.

They changed all of the buses too, and they took out the old cars and don't relicense them.

Most new engines are much smaller, than before, and the car sellers focus on them.
So you see the new, rich, LV bag carrying shanghainese girl leaving her Land Rover in the garage for taking out a camry, mazda 6, new audi etc, all with more efficient (not that that's what they care about) engines.

could also be, why, the gasoline consumption didn't rise significantly.
Just a thought.

[Sharky]

Re: 2009 Investment in China's real estate as much as than the rest of the world combined?

Hopefully some will still be able to get out with their assets when the collapse appears imminent; hopefully the borders will stay open and the government won't devalue the currency hugely like they did between 1981 and 1993 (six times).

I've done a bunch of work in Hong Kong. A Chinese friend of mine there said he was in Beijing recently and couldn't believe how many giant wads of cash were floating around. He suspected that it was from illegal activities; my guess is that it was from lots of new debt. He said most Chinese don't like debt--but if you look at the stats, even the distorted ones provided by the Chinese banks and government, they tell a much different story. The country is swimming in debt; the rate of increase in bank lending went up by 2.5X in 2008 alone.

Interesting economy in China.

People buy flats and don't live in them.
They buy cars and don't drive them.
They build skyscrapers and don't rent them out.
They build giant shopping malls that are almost completely unoccupied (such as the South China Mall).
They even build entire cities (like Ordos) that aren't occupied.

Those activities are actually destroying wealth, not building it.

Also, government debt isn't reported, to keep the illusion of the government's hoard of cash alive:

$680B liabilities of local governments at the end of 2008
$350B of new loans in 2009 financed public infrastructure projects guaranteed by local governments
$260B in bonds and guarantees left over from the bank bailout in 2003
$400B in debt guarantees for the big three banks

That's $1.7T total debt, which is on a par with Western countries relative to GDP.

On top of that, GDP growth figures are consistently inflated. Building a skyscraper adds to GDP, even if it remains empty. Yet the associated depreciation costs are not subtracted from GDP. The building continues, though, due to both government dictates (they can force banks to lend) and the huge amount of corruption at all levels.

The country is swimming in overcapacity. They overbuilt based on what ended up being false demand as a result of loose money and excessive debt in the US, and haven't adjusted yet to the reality of the situation.

The recent stimulus package was 14% of GDP -- obviously that level of stimulus can't be repeated too many times without significantly damaging the economy.

Like all bubbles, it strikes me as a game of musical chairs. Some will do well; others will lose their shirts. In fact, I think China may be the biggest bubble of all: with the rampant corruption, random violence, lack of individual rights, etc, it reminds me of what a country would look like if it was run by the mob.

[nicmakaveli]

Re: 2009 Investment in China's real estate as much as than the rest of the world combined?

Run like a mob, I like that.
And I couldn't have put it better myself.
It's also why I love it though.

Everybody in Shanghai, from small to big, always has one thing on their mind.
Hustle.
It's a whole culture thing. And I'm always surprised how fast they can save up new money again, it's a whole different system with half of the city being enterpreneurs.

I think the debt is more state agencies/companies and corruption, most of the people here, who are self-employed can't really get loans because they have no "official" income.

Illegal is very hard to define here, I would say, the giant wads of cash, much of it coming from foreign corporations, are just not officially reported.

It is, what it is, Cash.
Recently, a taiwan guy went bankrupt here, he asked a friend of mine to buy his penthouse, with cash 27Million RMB, or roughly 50% market price.
So, my friend got a deal, sold for cheap, and the guy was able to run away.
If it'd go through official channels, or with a loan, the government would have seized any money under his name in the bank.