Bubble always burst, including China Property Bubble....

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Bubble always burst, including China Property Bubble....

Post by Dennis Ng »

19 April 2010 - In year 2007, I shared my views on Capital Radio 95.8 FM that China stock market was a bubble and likely to Crash, just a matter of time....and that it was dangerously high and I would not buy China stocks or funds then (in year 2007).

The DJ Wang Lee Jeng asked me is there a chance that it might not Crash but just suffer a correction in prices (up to 20% drop is called a correction)...

I said to her and the radio listeners:"I've observed that Bubbles always burst, bubbles do not deflate (correct), so it is just a matter of time, not if."

The same thing is NOW happening to China Property Market. It is a bubble and day by day, it gets bigger.

Below is an interview whereby "business insider" shared that China Property market would burst as well.

Just remember that Bubble always burst.....China property bubble might burst in year 2011 or year 2012.....a matter of time, we don't know exactly when, just that as in all bubbles, they don't deflate, they burst...

P.S. in Year 2008, China Stock Market bubble burst, the shanghai stock index fell from a high of 6,100 by 70% to as low as 1,700.....today, 2 years after the bubble burst, Shanghai index is at 3,130, or still 49% lower...

Cheers!

Dennis Ng, http://www.HousingLoanSG.com


Q&A With Jim Chanos Part II: China's High-Rise Property House Of Cards

Business Insider: So moving on to China...

Jim Chanos: Yup!

BI: You're short China, it's a big thing...

JC: We're not actually short China. We are short entities that are selling into China.

BI: Ah, OK.

JC: There is a big misconception that has been posted out there, but our China call is a simple one: there's a property bubble going on. I'm not making a call on the Chinese economy, although it will have a problem when the property bubble bursts. We're not making a call on the currency on whether it'll appreciate or, god forbid, depreciate. What we're simply saying is you are seeing an epic building boom in China and more interestingly, an epic high-rise building boom in China.

It's not just high speed rail and airports and new roads. That's only a very small part of their infrastructure spending. This is primarily a story about people putting up high rise office buildings and condos in the big cities. That's what it is.

So when you look at it like that, the data supports it. I mean, people have taken a shot at us because "Mr. Chanos has never been to mainland China." Well hell, I didn't work at Enron either. Or "Oh, but he doesn't speak Mandarin."

Whatever. It doesn't matter. Using the Chinese government's own numbers as well as some western entities that are on the ground there, the numbers are what they are. The square footage being built is what it is. You can see it when you go there. It is a high-rise construction boom.

So when you look at it through that prism, you can begin to make some assessments. We've seen similar bubbles in Dubai, Miami - scores of other entities have gone through this and it never ends well.

Now, the real argument in China seems to be - the argument I think carries the most water for the China bulls - is somehow the government is going to be able to manage this. That they're going to let the air out of the bubble gently. That 9 guys who sit on the central committee of the country who got us into this mess are going to get us out of this mess. I wouldn't want to bet on that.

BI: Right.

JC: History tells us that it's a bad bet. And that somehow the government will, if I overpay for a condo, somehow bail me out. And again, I generally think that that's a bad bet. Whether you're Chinese or American, it doesn't matter; it's a bad bet almost anywhere.

The Chinese bubble has its own interesting set of anecdotes and circumstances and one of the more interesting ones from our perspective as a westerner is that when people were buying 2 and 3 condos in Miami for example, they would rent the 2nd or 3rd condo to try and get some rental income. In China, that's not the case.

BI: People are just buying.

JC: They're empty shells. When you buy a condo, you're getting an empty shell and nothing more. By and large most of the developments are 1100 square foot boxes. And they [the owners] don't rent them because people want to keep them basically as pristine as possible for when they flip them because new is better than old. So ironically, you have people that are buying multiple condos here to speculate who are carrying themselves - there's no rental income.

The other interesting thing about the boom here is that it is completely high end. When people talk to me about China's "migration of people" into the cities and the population and blah blah blah, and the growth of the economy, I said "That's all and good but they're putting up the equivalent of New York City highrises at almost New York City prices for a populous that is 1/10th of that per-capita income." So this building boom is aimed at: A) the corporate market, corporate highrises and office buildings or B) very high end of the residential market. It's not the masses - it's for people speculating.

BI: I've heard that a lot of families in China are maxing out as much as they can in terms of credit and borrowing in order to get into this.

JC: They have to! Keep in mind that the average median income in China, and it's only slightly higher in the cities, is something like $3500 per person. Typical second-tier city real-estate prices have now gone above $100 a square foot. So a typical 100 square meter condo is probably going to cost you after all your expenses (if you build it out to live) $120,000 to $140,000 US. Well say you're a dual income couple and you make $7000 to $10,000 a year total. OK? Even if you put down the 20% down that everyone's pointing to, that's 20% on your purchase price. You're still paying mortgage interest of probably ... 60 to 100% of your income, pretax.

BI: Pretax?

JC: Pretax. And that's not super high end - that's an urban couple, dual-wage earners in a second-tier city. So it's already getting to the absurd in terms of prices relative to incomes. And the problem is construction is 50-60% of China's GDP. And of that, the vast majority is this type of construction. There's going to be a real brick wall here being hit at 200 MPH - it's just a matter of when.

BI: So when do you see the bubble bursting for China?

JC: Well, always with these things, we're often early and it appears we're early here too. But the good news for office building bubbles is that they're pretty tangible. So when you see the apartments stop selling, when you stop seeing foundations being laid, and holes in the ground, when you see the cranes not going up anymore, buildings being half-complete - that'll tell you you're at the end.
Cheers!

Dennis Ng - When You Master Your Finances, You Master Your Destiny

Note: I'm just sharing my personal comments, not giving you investment advice nor stock investment tips.
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Post by Dennis Ng »

20 April 2010 - my comments: I have no doubt that in the long term, China Real Estate has a bright future and prices are likely to be higher. However, the author (Keith Fiz-Gerald) forgot that in the real world, prices do not move up in straight line, there are "cycle" in Property market, and Booms and Busts will happen and have happened before (in 1993, China property market crashed). Guess many people have short memory, including Keith Fiz-Gerald.

So I do agree that long term wise, China property market is likely to be Up, rather than Down, compared to Now, but I also see the possibility of Property Market Crash in possibly year 2011 or year 2012 for China as well.

Cheers!

Dennis Ng, http://www.HousingLoanSG.com

Reasons To Be Bullish For The Long-Term Future Of China Real Estate
Published on:
Monday, April 19, 2010
Written by:
Keith Fitz-Gerald

Despite some predictions that China is on the verge of a real estate bubble , key indicators show that property related values in China are rising, despite high vacancy rates. With strong double digit GDP growth since the end of 2009, the government's tightening of lender reserve requirements, increasing enforcement of development permits and growing urban migration, many informed institutional investors remain bullish on the long-term future of China's real estate market. See the following article from Money Morning for more on this.

China real estate boom
Given what you may have heard about Chinese property values in recent months, it may surprise you to learn that Chinese real estate investors are extremely value oriented.

And so are the institutional investors I've run into during my latest investment-research visit to this country. These institutional players want to lock up some valuable land parcels before 2020. That's the date by which 500 million Chinese citizens are expected to have moved into China's cities as part of the greatest urban migration ever recorded.

You can do the math: We're talking about a group that's 1.6 times the entire U.S. population ... moving from China's countryside to its cities in the next 10 years.

The Mass Migration "Big Bang"

A population shift of this magnitude can't help but be a major catalyst for increasing real estate values - especially in such top-tier cities as Beijing and Shanghai, where I am as I write this. This massive urbanization will also significantly shift the market dynamics of second-tier municipalities - such as Chongqing, where literally millions of people are pouring in from the countryside.

Some pundits, such as noted short-seller Jim Chanos, say this is already happening. Back in January, citing the vacancies that pepper the cities I've just named and the flood of speculative capital he says has washed through them, Chanos quipped that China is "Dubai times 1,000," - a sound-bite that's kept him in the media spotlight ever since.

Personally, I find that more than a little ironic considering he's never even set foot in China and didn't even begin studying China until last summer, critics say.

To hear Chanos and others talk about their concerns about a Chinese economic bubble , you'd think Chinese real estate developers and investors are essentially playing with Monopoly money.

My experience suggests otherwise. So does some of the latest market data that I've reviewed. One study, for instance, suggests that Chinese real estate has underperformed the benchmark MSCI China Index by nearly 30%.

The point is that Chinese real estate, on the whole, appears to be significantly undervalued - even at this stage of the game - when compared to regional alternatives in Hong Kong and Singapore, two other Asian markets that are a lot further along on the economic-development curve.

The bottom line - and the point that I keep coming back to - is this: If China's real-estate market is as far out of whack as some people suggest based on vacancies, property-related prices should be falling - even cratering.

But they're not.

In fact, they're rising - and so is overall growth.

China: The White Hot Economy

Just yesterday (Thursday), in fact, China announced first-quarter gross-domestic-product (GDP) growth of 11.9%, the country's fastest expansion in nearly three years and a rate that was faster than what analysts were expecting.

China's economy had advanced at a 10.9% pace in the final quarter of last year.

Stephen Green, head of Greater China research for Standard Chartered PLC (PINK: SCBFF) here in Shanghai, told MarketWatch.com that central planners in Beijing could be faced with an asset-price bubble in the second half of the year that could trigger a sharp credit contraction in 2011 - unless they're able to throttle growth back to a more sustainable pace.

"There are signs of overheating," Green said in the interview.

Beijing is well aware of the stakes and is taking steps to manage China's growth - with some signs of success.

As part of yesterday's report on economic growth, Beijing said that March's consumer price index (CPI) for China was 2.4% higher than a year earlier. That was down from the 2.7% increase in February, and is below the 2.6% increase that surveys by both Dow Jones Newswires and Reuters showed analysts were expecting.

In the real-estate realm, Beijing is raising reserve requirements for lenders, is tightening up on permits and construction licenses, and is even taking steps to halt illegal development. In some parts of China, local developers will often construct entire buildings and never pull a permit.

As incomes increase and China's consumer class continues to emerge, such pastimes as golf become all the rage. One result: Even though golf courses aren't exactly easy to hide, there may be hundreds of illegal links operating throughout China right now, the China Daily reported in a story that I read during my visit here.

If the markets were as overbuilt as some pundits allege, there wouldn't be any competition for the best properties. Instead, that competition is as fierce as I've ever seen it - an observation that was seconded by many of the private-equity investors I talked with at the Halter Financial Summit that I attended in Shanghai. Like me, these folks have been actively investing in the Asian markets for decades.

There's a very clear trend developing. As the property prices in Beijing and Shanghai increase in expense, many companies, investors and developers are shifting their focus to the second- and third-tier cities that have yet to experience the urbanization rush of their much-larger first-tier counterparts. That's going to broaden the overall advance, creating a more-sustainable environment for real estate investing and development even if major pockets of urban overvaluation exist today. It's precisely the pattern we described and told Money Morning readers to expect several years ago.

The speculative excesses that do exist appear to be limited to very-high-end residential real estate (read that to mean ultra-luxury real estate) in the primary cities. Over -speculation hasn't meaningfully impacted the commercial-real-estate sector, or the more-mainstream housing sectors, although that could still happen . Residential projects aimed at the emerging consumer class, as well as the business-related real estate projects that are so important to a nation's economic advance, both remain in the realm of "investments" - and not speculation - which is why they continue to have very clear government support as part of central planning objectives and China's ongoing growth.

In other words, Beijing is willing to let the "Ferrari set" flame out, but clearly wants the middle class to succeed because that group's emergence will create a foundation for both social and economic stability.

No wonder the enlightened institutional investors that I've talked with here in China continue to be optimistic. They understand that they could sit on the sidelines and wait for the corrections that periodically come along. But these investors also know that the "bottom" of the next correction could easily be represented by much higher than the prices we're seeing today - and probably will be.

How to Profit From China's Mass Migration

What does this mean for you?

If you're actually "on the ground" here, and have enough money and the ability to do your own due diligence - or "DD" as the Chinese call it - you can begin hunting in the second- and third-tier cities, right alongside everybody else headed that direction. There's certainly money to be made there in private equity.

For U.S.-based investors, however, there's a much-easier way to participate. Consider investing in one of a handful of exchange-traded funds (ETFs) that offer exposure to China's real-estate market - such as the Claymore/Alpha Shares China Real Estate ETF (NYSE : TAO) and the Claymore Alpha Shares China All-Cap Fund (NYSE: YAO). The first fund concentrates specifically on real estate, while the second fund is more broadly diversified and includes banking, construction companies and developers.

A more generalized alternative is the iShares FTSE NAREIT Asia ETF (NYSE: IFAS), which is a regional play that has approximately 8% to 10% of its holdings allocated to Chinese real estate. There are also several closed-end funds that offer a similar, generalized exposure, including the RMR Asia Pacific Real Estate Fund (AMEX: RAP).

As you incorporate this sector into your overall investment strategy, it's important to keep in mind the general advice that I use as part of my own portfolio strategy for China. The Asian giant remains the biggest wealth-creation opportunity of our lifetime - in the long run. In the near term, you be certain there will be volatility, periodic pullbacks and even corrections.

And while the real-estate sector offers some of the best long-term appreciation of any China-oriented investment category, the investments I've just mentioned are all trading near to the tops of their 52-week ranges. And that means they could be poised for a short-term pull back just as easily as a long-term breakout. Position any investments accordingly.

This article has been republished from Money Morning. You can also view this article at Money Morning, an investment news and analysis site.
Cheers!

Dennis Ng - When You Master Your Finances, You Master Your Destiny

Note: I'm just sharing my personal comments, not giving you investment advice nor stock investment tips.
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Post by Dennis Ng »

Here's a different view that there is NO bubble in China Property market for your reading pleasure.

Cheers!

Dennis Ng, http://www.HousingLoanSG.com


Jim Chanos Is Wrong: There Is No China Bubble
Shaun Rein, 01.11.10, 03:53 PM EST
He misunderstands basic facts about income, real estate and the currency there.


The famed short-seller Jim Chanos has been making waves lately by saying he thinks China is in a bubble and ready to collapse in 2010. He argues that easy credit has let real estate and stock market prices shoot upward. He also says the Chinese government is cooking the numbers to show 8% growth in gross domestic products, when actually China can't keep growing when the rest of the world has been hit so hard by the financial crisis.

Chanos called it right on Enron and Tyco ( TYC - news - people ) before they collapsed. He is no lightweight observer of the economic scene. However, he is wrong about China. For once I agree with the famed investor Jim Rogers, who cofounded the Quantum Fund with George Soros. He says China is not in a bubble and adds that he finds "it interesting that people who couldn't spell China 10 years ago are now experts on China."

Betting against China in 2010 is a bad mistake for investors and companies alike. Here are three reasons why Chanos is wrong and Rogers is right about the strength of China's economy:

Chanos' first error is his belief that China's real estate sector soared in 2009 because of speculation triggered by a loosening of credit by China's banks. Lending in China doubled to $1.35 trillion in the first 11 months of 2009. Real estate prices rose sharply throughout the country and almost doubled in cities like Shenzhen. Chanos calls that a bubble--"Dubai times 1,000--or worse"--that could lead to fallout like the subprime mortgage mess in the U.S.

There are, however, fundamental differences between China's real estate and consumer finance markets and those of the U.S. and Dubai, which Chanos compares them to. First, when buying residential properties, consumers in China have to put down 30% before taking out a mortgage. For a second home, they have to put down 50%, no matter what their net worth. Therefore, China doesn't have the reckless consumer behavior that occurred in the U.S., where people with bad credit were taking out huge loans from Countrywide with no money down, or were buying 10 homes without deposits in the hope of flipping them in a few months. People who buy homes can afford it.

Also, mortgages are not being spliced up and packaged and securitized by the likes of Citigroup ( C - news - people ) and Bank of America ( BAC - news - people ). Instead mortgages are held by the original lenders, the way they were in the U.S. before financial innovation and lack of regulation broke down the old rules.

Reader Comments
One item to think about is the fact that Chinese wealth has nowhere to go but back into China. Here we buy into the global economy. There, folks can buy only stocks or property. Thus, the real estate....

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The Chinese government also has no qualms about overseeing the market and has not been run by Ayn-Rand-loving free marketers like Alan Greenspan, who seemed to believe that no government intervention at all was best. The Chinese government is gravely concerned about social stability because of the widening gap between the rich and the poor. It is therefore limiting the sizes of new apartments and restricting the construction of stand-alone luxury villas. (Most people in China's urban areas live in high-rise apartment buildings. I myself live in a 60-story building.) The government is also forcing developers to build low-income housing. And to prevent flipping and excess speculation, it is heavily taxing sellers who unload their properties within two years of buying them.

The real estate business to be concerned about is commercial building. There has been way too much construction of large office towers, especially in Shanghai, which is gearing up for its World Expo this year. Too many gleaming skyscrapers sit empty of tenants. The glut of office space has already caused rental prices to drop in places like the Shanghai financial district, Pudong.

Too much leverage, not high prices, caused the problems with real estate in Dubai and the U.S. There just isn't that much leverage in China. So even if prices are too high, a drop of as much as 20% or 30% wouldn't cause anything like the tsunami that hit the American and Dubai markets.
The second way Chanos is wrong about China is that he, like most economists and Wall Street analysts, underestimates income there. I have recently been debating several Harvard economists who worry that incomes haven't risen as fast as GDP in China. They argue that it shows that too much of China's growth has been a matter of government investment in unsustainable infrastructure projects like bridges and highways, as happened earlier in Japan. They point out that Chinese consumers account for just a third of the economy in China, vs. two-thirds in the U.S. However, my firm, the China Market Research Group, estimates that Chinese consumers will come to account for half of the economy within the next three to five years as the role of exports diminishes. (See my "Three Myths About Business in China.")
If anything, incomes are grossly underreported in China. A simple look at how accounting works will show why. Whereas in the U.S. individuals must report their income to the Internal Revenue Service every year, in China all individual tax is reported and paid for by companies, except for that of high earners. Many Chinese companies limit the tax they pay by reporting low salaries and then paying their employees higher amounts while accounting for the difference as business expenses like phone bills.

The employees are happy because they make every bit as much as they were promised, and the companies are pleased to lower their tax exposure.

Also, many companies pay for housing and cars for their employees, a holdover from the old system of state-run businesses. Most Western economists don't count those expenses as income, but they should. Deceptive accounting of income is so widespread that the government has announced plans to tax some business expenses in state-run enterprises--the kinds of expenses that let executives pay taxes on earnings of $300 a month while living in multimillion-dollar homes and driving Mercedes.

The third thing Chanos gets wrong about China is the notion that the yuan is likely to appreciate. In the short term, it would be disastrous for China to let that happen, as I wrote in "Why Krugman Is Wrong About The Yuan." It would cause China's exports to plunge, swell the Chinese unemployment rolls by millions, and destabilize the financial system. In the long term, however, once the world's economy stabilizes, appreciation of the yuan might make sense. Getting exposure to Chinese assets now would benefit an investor when that time comes.

Chanos has an excellent track record in divining the future. However, part of his job as a short seller is to make money by causing markets to question good things. That can be useful for keeping companies honest and in check. But in this case he clearly doesn't understand the economic system he's talking about. China is not in imminent threat of collapse, and investors and companies are wise to stay involved with it, as Rogers argues.

Shaun Rein is the founder and managing director of the China Market Research Group, a strategic market intelligence firm. He writes for Forbes on leadership, marketing and China. Follow him on Twitter at @shaunrein.
Cheers!

Dennis Ng - When You Master Your Finances, You Master Your Destiny

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Post by Dennis Ng »

23 April 2010

China's middle-classes lose property hope ~~

http://www.atimes.com/atimes/China_Busi ... 3Cb01.html

Housing prices in Beijing have now broken all records, rising by 40% since 2007. A square meter of residential property in the capital now costs an average of 26,000 yuan (US$3,800), but the average per capita monthly income is only 2,000 yuan.

The resentment by the country's burgeoning middle-class over failing to get a share of the economic pie is now on par with the grudge held by many Chinese peasants, who feel cheated out of their land, banned from settling in the big cities and left out of the economic boom.



Curbing property speculation

http://www.chinadaily.com.cn/thinktank/ ... 760052.htm

~~ Recent government measures to stem rising housing prices will change supply and demand to cool market expectations. Statistics show that the volume of China's private loans from banks hit 2.46 trillion yuan last year, four times the amount of the previous year's 600 billion yuan.

In the first quarter of this year, an additional 902 billion yuan of private lending was approved, more than twice the 422.3 billion yuan in the same period of last year. A large portion of the combined 3.4 trillion yuan of personal loans in the past 15 months have reportedly been pumped into the country's real estate market, directly fueling the rapid rise of property prices.


The excessively loose credit environment since the latter half of 2008 has converted the country's real estate sector into a speculator's heaven, much like the stock market.
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Dennis Ng - When You Master Your Finances, You Master Your Destiny

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Post by Dennis Ng »

As at March 2010, China's top 5 cities' property price surge (new units) as compared to a year ago:

海口 (Haikou, Hainan) +64.8%
三亚 (Sanya, Hainan) +57.5%
温州 (Wenzhou, Zhejiang) +22.3%
金华 (Jinhua, Zhejiang) +20.9%
广州 (Guangzhou, Guangdong) +20.3%

As at March 2010, China's top 5 cities' property price surge (re-sale units) as compared to a year ago:

三亚 (Sanya, Hainan) +50.4%
海口 (Haikou, Hainan) +40.4%
深圳 (Shenzhen, Guangdong) +23.9%
温州 (Wenzhou, Zhejiang) +18.6%
银川 (Yinchuan, Ningxia‎) +16.2%
Cheers!

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Andy Xie also thinks China Property is a Bubble

Post by Dennis Ng »

Economist Andy Xie also thinks that China Property is a Big Bubble waiting to burst.

Commentary by Andy Xie
April 26 (Bloomberg) -- "My maid just asked for leave," a friend in
Beijing told me recently. "She's rushing home to buy property. I suggested
she borrow 70 percent, so she could cap the loss."
It wasn't the first time I had heard such a story in China. Some friends
in Shanghai have told me similar ones. It seems all the housemaids are
rushing into the market at the same time.
There are benefits to housekeeping for fund managers. China's housemaids
may be Asia's answer to the shoeshine boy whose stock tips prompted Joseph
Kennedy to sell his shares before the Wall Street Crash of 1929.
Another friend recently vacationed in the southern island- resort city of
Sanya in Hainan province and felt compelled to visit a development sales
office. Everyone she knew had bought there already. It's either buy or be
unsocial.
"You should buy two," the sharp sales girl suggested. "In three years,
the price will have doubled. You could sell one and get one free."
How could anyone resist an offer like that?
The evidence in official-corruption cases no longer involves cash stashed
in refrigerators or starlet mistresses in Versace clothing. The evidence is
now apartments. One mid-level official in Shanghai was caught with 24 of
them.
China is in the throes of a vast property mania. First, let me make it
perfectly clear that calling China's real-estate market a "bubble" isn't
denying China's development success. As optimism is an essential
ingredient in a bubble, economic success is a necessary condition. Nor am I
saying that prices will drop tomorrow. A bubble evolves and bursts in its
own time. When it is about to burst, I'll let you know.

Free Lunch

Expectations of a Chinese currency revaluation are, perhaps, the most
important force inflating the bubble. First, it plays to the latent human
desire for a free lunch. You just need to exchange your money for Chinese
yuan. According to all the experts on Wall Street, you can only gain. The
money has been gushing into China.
Second, the revaluation story has kept Chinese money inside the country.
The dollar has always been the safe-haven asset for Chinese. This is why
Chinese banks had a large dollar deposit base. Of course, anybody who was
somebody had dollars offshore. Now all that money is back. More
importantly, any income, legal or otherwise, now stays in China.

Flats Beat Cash

Why would corrupt officials keep apartments rather than cash? Well,
according to Wall Street, the yuan is going to appreciate. So holding
dollars is out of the question. And why hold Chinese cash when property
prices are always going up? The corruption money can be turbocharged in the
real-estate market. Only when they are caught do they understand the
downside of holding fixed assets.
The massive liquidity waves have prompted Chinese banks to lend as much
as possible. One Wall Street tradition adopted quickly in China was bonus
recipients signing company checks to themselves. All you need is to report
eye-popping quarterly earnings. It is an easier game than on Wall Street:
The Chinese government keeps the lending spread wide by fixing both the
deposit and lending rates. You just have to lend. The earnings will follow.
Might the loans turn bad in three years? Well, I'm not going to give back
my bonuses, right?
For a bubble to last you need a force to hold it together when it
stumbles. Wall Street kept pumping out new natural or synthetic products to
turn debt into demand for assets. Local governments play this role in
China.

Future Profits Now

When it comes to interested parties, Chinese governments are knee-deep in
the bubble. They get all the money from land sales. Land values have risen
to half of the development cost. In hot spots, land costs more than the
development -- the governments want to collect the future price gain
immediately.
When properties are sold, transaction and profit taxes kick in.
Developers pay more levies to the governments than they earn. When
developers finally book their earnings, they must put it to work, as good
Wall Street analysts would recommend, so they buy land. As land prices are
much higher, their measly earnings aren't enough, so they have to borrow.
The governments get all their earnings and debt repayments. Can you blame
them for boosting the market whenever it slips?
Land obsession is another force at work. China was a rural economy not so
long ago. The most important asset was always land. "Be a government
official and become rich" is a millennium-old Chinese saying. It didn't
explain where the money went. It always went into agricultural land. In
cities, you only see buildings, not paddy fields. But the buildings sit on
land.
Now housemaids are in the market. Who else? Never underestimate 1.3
billion people. In China, they say you should take the shoeshine boy's
advice. Many would listen to him.
Welcome to China, the land of getting rich quick.

(Andy Xie is an independent economist based in Shanghai and was formerly
Morgan Stanley's chief economist for the Asia- Pacific region. The opinions
expressed are his own.)
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Dennis Ng - When You Master Your Finances, You Master Your Destiny

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Post by Dennis Ng »

hopefully, the China Property bubble does not burst in year 2010.....sometime later in late year 2011 or year 2012....
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Post by Dennis Ng »

China Property Prices have surged by 200% to 500% in the last few years, thus even falling by 30% to 50% from current levels is NOT impossible.

Cheers!

Dennis Ng, http://www.HousingLoanSG.com

开发商新盘入市最高打7折 退房潮加剧楼价走跌

2010年06月25日
华夏时报 王冰凝

北京楼价终于普降了,但这仅仅才是开始。开发商们已经普遍开始在政策面前低头,选择了直接降价的方式来销售 旗下楼盘。目前一手房和二手房相互影响,同时走跌,最高跌幅已达30%。同时退房潮的出现则在无形中加剧了楼市的低迷和楼价的走跌。

一手房普降最高打7折

打折风潮大张旗鼓地开始了。根据某网购房中心最新统计数据显示,截至2010年6月22日,北京在售打折楼 盘数量比一个月前增加了15%,差不多近80个项目有降价趋势,折扣力度从以前较普遍的9.8折扩大到9折 甚至8.5折,其中部分项目特价房的折扣幅度更大。

而据记者了解,燕郊、通州、望京等区域楼价震荡幅度最为明显,目前也是折扣幅度最大的区域,这些区域的在售 楼盘目前基本上可以打9折,个别项目折扣还能更低。

与此同时,新开盘项目则普遍开始以低价入市。

6月20日,燕郊天洋城三期号称以“震撼底价”开盘,此次推出的所有新品以7800元/平方米的均价公开发售。比起今年4月,天洋城二期11000元/平方米的均价,售价直降30%,相当于打了个7折。而对比2009年年底天洋城二期约 7800元/平方米的销售均价,相当于该区域部分楼盘价格已经回落到2009年下半年的价格。

另据记者了解,即将开盘的保利茉莉公馆不仅推出了茉莉基金卡每天优惠200元的优惠活动,而且计划对外的开 盘价格为1.5万-1.7万元/平方米,而在此前的4月28日,同在大兴黄村区域的绿地集团下属新里西斯莱公馆一期1060套房源开盘销售 时,售价约为1.85万元/平方米左右,保利茉莉公馆相当于直降1500-3500元/平方米。

通州二手房跌幅超30%

随着楼市调控政策的影响进一步显现,二手房受到的影响更大,价格下行的趋势也更加明显。

据北京中原三级市场研究部的数据显示,价格相对较高的二手商品房市场中交易量快速下降更加明显。目前北京中 高档二手商品房平均价格为18500元/平方米,较新政出台时的4月中旬下跌6.84%。

而据记者从新盘降价幅度较大的通州地区多家经纪公司了解到,新政发布以来,通州地区新盘降价的同时,二手房 价格下调幅度超过30%。

与此同时,新房打折范围和打折幅度逐渐增大,也进一步刺激了相应区域的二手房价的进一步下行。

以位于朝阳区望京阜通西大街与望京街交会处的合生麒麟社为例,其在售楼盘均价为3万元/平方米,近日该楼盘的特价房折扣幅度达到了9.6折,该楼盘的二手房价受打折促销影响,已经下跌到2.1万 元/平方米左右,与4月份价格最高时的2.7万元相比,跌幅已超过20%。

“随着近期该楼盘新房打折促销力度的加大,其二手房价还将继续下跌。”伟业我爱我家市场研究中心分析人士认 为。

打折及退房恶性循环

北京楼价的普降终于开始了。与此同时,与2008年那一轮房价走跌有着惊人相似的是,退房现象也开始集中出 现。

根据北京市房地产交易管理网的统计显示,绿地新里西斯莱公馆4月28日开盘后一度热销,但从5月1日开始却 陆续出现了退房记录,截止到6月24日,已经有16条退房记录。这不得不使人联想到这一系列的退房记录是否 与近期绿地集团的大面积降价有关。

尽管绿地集团称新里西斯莱公馆的退房主要是因购房者信息登录出现了问题导致的退签,但仍难以消除业内人士的 质疑。

遭遇退房的远不止新里西斯莱公馆,北京阿尔法社区、林肯公园、中信城等多家楼盘都受到政策波及,据记者了解 ,退房的买家一部分是因二套房政策生变无法办理贷款直接要求退房;部分则是认为新政策影响房价将下调要求退 订。

而退房潮也同样出现在上海、杭州、广州等地。“在上一轮楼市调控中,部分买房不久的购房者则因房价下降而提 出差价补偿、退房等要求,进一步刺激了购房者的观望情绪,从而使得房价持续走跌。目前看,楼价普降仅仅是个 开始,随着地产调控在下一个阶段仍然从紧,新房销售率的持续低迷,必将导致降价潮进一步扩大,而降价幅度还 将加大。”国奥地产分析师认为。
Cheers!

Dennis Ng - When You Master Your Finances, You Master Your Destiny

Note: I'm just sharing my personal comments, not giving you investment advice nor stock investment tips.
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Post by Dennis Ng »

House price index ends long rally

By Cao Qian
2010-7-2

SHANGHAI'S monthly house price index fell in June, ending a 15-month rally amid increasing supply and shrinking sales.

The index, which tracks price movements of existing homes citywide, lost 17 points to 2,565 last month, the first drop since March 2009. It rose 0.15 percent in May, 0.69 percent in April and 0.81 percent in March.

"Home prices failed to remain at record high as more owners put their houses for sale while buying momentum continued to be slack," said Tao Ting, an analyst at the index compiler, Shanghai Existing House Index Office. "About 80 percent of areas monitored by the office saw price cuts in the past month."

He noted that the "central government seems to remain firm in its stance to curtail investment in multiple properties for speculative purposes and therefore, no major rebound in prices could be anticipated in the near future."

The prices of existing homes in five downtown districts were mixed in June. Prices dropped in Huangpu, Changning and Xuhui while Luwan and Jing'an grew slightly.

Home prices the city's outlying areas fell an average 1.42 percent last month, against an average drop of 1.02 percent in May, the compiler said.
Cheers!

Dennis Ng - When You Master Your Finances, You Master Your Destiny

Note: I'm just sharing my personal comments, not giving you investment advice nor stock investment tips.
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China Real Estate Market Review

Post by Dennis Ng »

11 July 2010

China Real Estate Market Review - Standard Chartered 6 July 2010

• Residential property sales have dried up since April; developers have delayed project launches rather than cut prices

• We expect downward price adjustments in H2 – 20-30% in Tier 1 cities, 10-20% in Tier 2

• The government is reluctant to relax policy, but a slower H2 may force it to change its mind

As we enter the all-important third quarter, we provide a quick review of what is happening in China’s property market. The received wisdom (to which we subscribe) is that Q3 will see a significant price correction in residential property. With increased new supply meeting a still-reticent buying public, we believe developers will be forced to cut prices. The key question, however, is by how much will prices have to fall. This will depend on the developers’ cash positions – and the extent to which they believe the central government will shift policy towards a more neutral stance.

A note on the data: we use weekly data from transaction centres, all of which is for the primary market. In addition to Shanghai, Beijing and Shenzhen, we monitor 11 other cities across China, which offer the most complete data: Tianjin, Hangzhou, Guangzhou, Xiamen, Changsha, Dalian, Chongqing, Haikou, Sanya, Chengdu and Wuhan. (The latter five provide data only on all properties sold commercially, rather than just residential properties.)

Transactions

Since the introduction of anti-speculative policies in mid-April, transactions (measured on a four-week moving-average basis) have fallen by roughly 60% across the 14 major cities we monitor. They have fallen dramatically in Beijing (-70%), Shanghai (-28%) and Shenzhen (-57%), the cities at the centre of the speculative storm in 2009 and the main target of the State Council’s anti-speculative measures. Chart 1, which shows units sold per week in these top three cities, provides clear evidence of this. Other, smaller cities have not been immune either. Haikou (-95%), Hangzhou (-90%), Dalian (-90%) and Xiamen (-76%) all witnessed significant contractions in sales volumes. As Chart 2 shows, the downward trend in total square metres of properties sold monthly across the 14 cities has yet to bottom.

Prices

Primary transaction prices in the top three cities have fallen by 16% on average, according to the data shown in Chart 3. However, there are variations among these cities too, with Beijing (-20%) and Shenzhen (-19%) seeing more pressure than Shanghai (-8%). The market is still waiting for the formal release of Shanghai’s local housing-market policies, which are widely believed to include some kind of property tax.

However, as we have highlighted before, data on average prices must be interpreted very carefully. The declines noted above may just be the effect of lower transaction volumes, particularly for higher-end properties.
Cheers!

Dennis Ng - When You Master Your Finances, You Master Your Destiny

Note: I'm just sharing my personal comments, not giving you investment advice nor stock investment tips.
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Re: Bubble always burst, including China Property Bubble....

Post by Dennis Ng »

Dennis Ng wrote:19 April 2010 - In year 2007, I shared my views on Capital Radio 95.8 FM that China stock market was a bubble and likely to Crash, just a matter of time....and that it was dangerously high and I would not buy China stocks or funds then (in year 2007).

The DJ Wang Lee Jeng asked me is there a chance that it might not Crash but just suffer a correction in prices (up to 20% drop is called a correction)...

I said to her and the radio listeners:"I've observed that Bubbles always burst, bubbles do not deflate (correct), so it is just a matter of time, not if."

The same thing is NOW happening to China Property Market. It is a bubble and day by day, it gets bigger.

Below is an interview whereby "business insider" shared that China Property market would burst as well.

Just remember that Bubble always burst.....China property bubble might burst in year 2011 or year 2012.....a matter of time, we don't know exactly when, just that as in all bubbles, they don't deflate, they burst...

P.S. in Year 2008, China Stock Market bubble burst, the shanghai stock index fell from a high of 6,100 by 70% to as low as 1,700.....today, 2 years after the bubble burst, Shanghai index is at 3,130, or still 49% lower...

Cheers!

Dennis Ng, http://www.HousingLoanSG.com
Hi all,

analyts still can't agree amongst themselves, some say there is a Bubble in China Property, some say there is NONE.

My personal opinion is:

1. yes, there is a bubble in China property market.
2. no, I don't know exactly when it will burst, is it year 2010, 2011 or 2012?
3. But from past experience, ALL bubbles burst, bubbles do not just "correct" fall by 10% to 20%.....when bubble burst, the price fall is 30% to over 50%.
4. Yes, I think that in the long run, say 10 years from now, China property prices would be higher than current prices.
5. No, that still does not mean that there will NOT be burst of bubbles within the 10 years.....becos there'll always be Market Cycles in between.
6. When China Property bubble burst, how will this affect Singapore? This is something right now that I don't have a Grasp on....

I'm just sharing with you my frank comments.
Cheers!

Dennis Ng - When You Master Your Finances, You Master Your Destiny

Note: I'm just sharing my personal comments, not giving you investment advice nor stock investment tips.
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implication to global and singapore markets

Post by sheiwah »

hi dennis, if the property market in china does crash, what are the implications with regards to the our own market...and globally.

thanks!
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Re: implication to global and singapore markets

Post by Dennis Ng »

sheiwah wrote:hi dennis, if the property market in china does crash, what are the implications with regards to the our own market...and globally.

thanks!
if only China crash, then it might not be a big impact, since China only constitutes 10% of the Global Economy. However, I see a possible Global Financial Crisis happening in late year 2011 or year 2012, and when that happens, no country is likely to escape unscathed.
Cheers!

Dennis Ng - When You Master Your Finances, You Master Your Destiny

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Post by Dennis Ng »

I also agree with Jim Chanos that there is a Property bubble in China's coastal cities, Shanghai, Beijing, Shenzhen and Guangzhou.

Below are excerpts of his views in Fortune magazine 6 Dec 2010: "China Property Bubble".

China is building 5 billion sm of new property, 2.6 billion sm in office space alone. There are 1.3 billion people in China, so that works out to 5 by 5 sf of office space for each living person in China.

Fixed asset investment accounts for 60% of China’s GDP, of which about ¼ is from Real Estate investment.

New property sales accounted for 14% of China’s GDP in year 2009.

Consider Dubai, at the peak of the property boom, there were 240 sm of property under development for every US$1 million in GDP. In urban China today, the figure is 4 times higher.

A property crash in China would have serious repercussions throughout the world. Iron ore producers, in particular, will suffer badly, since so much demand for iron ore comes from all the construction activities in China.

Only 40% of all properties purchased in China are financed. Even when they are financed, financing would be typically just 50% financing. So when the market crash, there might not be a "Housing Loan Crisis" as what happened in U.S. (sub-prime crisis). But many of the banks in China do lend to property developers, and when property developers go belly up, China banks would have bad debts, but unlikely to create a systemic crisis in China's banking system though.

The main cities with high property prices are Shanghai, Beijing, Shenzhen and Guangzhou. So we are talking about a possible Property Market Crash in these main cities, not the 2nd and 3rd Tier cities.
Cheers!

Dennis Ng - When You Master Your Finances, You Master Your Destiny

Note: I'm just sharing my personal comments, not giving you investment advice nor stock investment tips.
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