China heaed US style housing Crash and Bailout

[topjumper]

you do know that your premise is not factually correct, yeah? for if it was_ home prices would be coming down and not continue to rise. This is not a thing of past ( the article link I posted and many such others are very recent), it's very much alive and kicking right now.

Would you be so kind to point out where I said is not factually correct?

Sure it's not going to be a bust at the level of the crash the US faced( thank god for that, I would not wish it on anybody), but a china housing bust would still adversely affect the US and world economy. so again, there is no upside for anyone when and not IF it happens.

So why titled "China headed US style housing Crash and Bailout"? Having a slow down on the housing market and drop in retail house prices is very different from "heading for crash and bailout". Btw I'm not supporting the chinese housing market here, and I've no doubt at the local government level there is a degree of vested interest in propping up prices and over-investment, but this unfortunately is nothing new in China with state directed capitalism, but I wouldn't dream of betting on a subprime style crash in China for reason I stated before -- it is one thing to mis-allocate capital, it's another to mis-allocate capital with grossly irresponsible leverage.

Also on a not so related point: many financial journals may just well be called political journals -- take a look at wall street journal or the economist, it's more about politics than economics with attention grabbing headlines, I'm all for free-press, but free-press shouldn't mean press free of responsibilities.

 

[lcloo]

For the last 30 years, there are predictions on China going burst from the western journalist/columist/economist/whatever experts, almost on a yearly basis. We are tiring of reading such stupid opinions.

 

[conworldus]

Funny an Indian started this thread, even though Mumbai, Dehli's property price are wayyyy higher that of Shanghai and Beijing..

 

[JayAtl]

Would you be so kind to point out where I said is not factually correct?



So why titled "China headed US style housing Crash and Bailout"? Having a slow down on the housing market and drop in retail house prices is very different from "heading for crash and bailout". Btw I'm not supporting the chinese housing market here, and I've no doubt at the local government level there is a degree of vested interest in propping up prices and over-investment, but this unfortunately is nothing new in China with state directed capitalism, but I wouldn't dream of betting on a subprime style crash in China for reason I stated before -- it is one thing to mis-allocate capital, it's another to mis-allocate capital with grossly irresponsible leverage.

Also on a not so related point: many financial journals may just well be called political journals -- take a look at wall street journal or the economist, it's more about politics than economics with attention grabbing headlines, I'm all for free-press, but free-press shouldn't mean press free of responsibilities.

factually incorrect part was that the down payment was a method to alleviate the housing bubble ( as I read it). although, it is one method that can be applied. It is however- not slowing down the rising housing prices in china and has not been for a awhile. after all , traditionally you been a cash economy because people save more there.

I give you that subject header could be more nuanced by adding " almost' headed to it ... but if you look at it terms of percentages, then, it could be very close if not higher than the US.

Follow me on this for a minute. Given you have 4.XX trillion GDP and we have 14.XXX GDP , the percentages could be the same. although the total net loss would be higher for the US because of the 3X size of it's GDP.

But, that's not really the bane of my contention here...rather after seeing the alarming continued failures in the EU. Which, btw Obama warned the EU they needed to spend more or risk double dip recession. Having China also sitting on a hot plate, gives the world economic view some scary scenarios. And if you're honest , this currency manipulation is also contributing to not having a faster recovery.

Articles I tend to put are written by unbiased financial nerds. But one cannot dismiss publications as always being bias. Else nobody is to be believed on both sides. I try to see if there is consensus across a board on the said topic.

 

[JayAtl]

Funny an Indian started this thread, even though Mumbai, Dehli's property price are wayyyy higher that of Shanghai and Beijing..

is it? but even so this American Indian feels that there is no economic crisis w/ worldwide ramifications looming out there because of it. Concentrate on the message and not the messenger..

 

[StingRoy]

Funny an Indian started this thread, even though Mumbai, Dehli's property price are wayyyy higher that of Shanghai and Beijing..

Mumbai and Delhi properties are expensive because there is a genuine need for more houses. I have rarely seen apartments empty in these cities. People are willing to pay upto 1 year's rent in advance to stay in them which indicates that the market is hungry for a lot more.

On top of it the govt constructs housing for the lower economical sections of the society which allows the working class to be able to stay in these cities.

 

[conworldus]

Mumbai and Delhi properties are expensive because there is a genuine need for more houses. I have rarely seen apartments empty in these cities. People are willing to pay upto 1 year's rent in advance to stay in them which indicates that the market is hungry for a lot more.

On top of it the govt constructs housing for the lower economical sections of the society which allows the working class to be able to stay in these cities.

Well for your information, Mumbai price is about 3 times of Shanghai, and Mumbai's economy is only a fraction of Shanghai. If Mumbai has no bubble, Shanghai doesn't, and the rest of China definitely don't (properties are dirty cheap in most Chinese cities)

Shanghai also has a genuine need. You see, Chinese people love invest in properties, and the majority of buyers pay cash. For those who take the loan, 30% is the minimum down payment. This is a farcry from the 0 down, fradulous American housing market. The west has been predicting a Chinese crash for the last 30 years, and investors who followed their advice put their money in "safe" things like AAA rated CDO, Enron, Citibank, GM. Guess what happened to them, gee...

 

[topjumper]

factually incorrect part was that the down payment was a method to alleviate the housing bubble ( as I read it). although, it is one method that can be applied. It is however- not slowing down the rising housing prices in china and has not been for a awhile. after all , traditionally you been a cash economy because people save more there.

No I do think raising down payments was a method of alleviating the housing bubble, think about it -- if you require 0% down payment and the housing market is going faster than inflation, then you will encourage people to play the housing market (this is how the subprime in the US developed), but on the other hand if you require 30%-100% deposit on a house, then you will curb speculation and cool down the market. Also housing market trends have large inertia and any policy takes time to have effects, the chinese government imposed the new deposit requirements earlier this year and already there are signs of cooling down on the coastal regions, this is exactly what you what -- you don't want an abrupt short fall on prices, you want a gradual correction.

I give you that subject header could be more nuanced by adding " almost' headed to it ... but if you look at it terms of percentages, then, it could be very close if not higher than the US.

Follow me on this for a minute. Given you have 4.XX trillion GDP and we have 14.XXX GDP , the percentages could be the same. although the total net loss would be higher for the US because of the 3X size of it's GDP.

What percentage are we taking about here? China's current housing loans as a percentage of GDP is ~15%, the US on the other hand was at 79% at its peak before everything crashed, it is nowhere near "close if not higher" compared to the US.

In the article it mentioned that in some counties almost 40% of local governments income is property related, but exactly how many counties in China derive 40% of its income from properties? Also you have to take into the underlying economic trends into account, for example for decades the Hong Kong government has been relying on selling properties as a major source of income, but I don't hear people screaming Hong Kong property market is a bubble.

But, that's not really the bane of my contention here...rather after seeing the alarming continued failures in the EU. Which, btw Obama warned the EU they needed to spend more or risk double dip recession. Having China also sitting on a hot plate, gives the world economic view some scary scenarios. And if you're honest , this currency manipulation is also contributing to not having a faster recovery.

Articles I tend to put are written by unbiased financial nerds. But one cannot dismiss publications as always being bias. Else nobody is to be believed on both sides. I try to see if there is consensus across a board on the said topic.

The article quoted Andy Xie's research, if you take his words for it, then here is his follow on report on the chinese housing market: Chinese Real-Estate Bust Is Morphing Into a Slow Leak: Andy Xie.