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Chinese housing bubble and the possible consequences
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avantgarde Offline
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Post: #1
Chinese housing bubble and the possible consequences
It seems like China has a crazy real estate market with high annual increase in price but high vacancies. There is definitely too much speculation and majority of investments in China are in real estate. The Chinese government is introducing new policies to tighten speculation for housing, but the bubble is still growing.
Quote "Housing and land prices in China have increased continuously and dramatically for the past two decades. In fact, housing price growth has significantly outstripped income growth. Current housing prices are roughly 11 times annual income; in large cities such as Beijing and Shanghai the price-to-income ratio is as high as 23 to 1.1 By comparison, Tokyo house prices were 15 times income and U.S. house prices 5 to 6 times income when the Japanese and U.S. housing bubbles, respectively, burst in 1990 and 2006. Rapid price growth, large price-to-income ratios, and high vacancy rates (between 25 and 30 percent) suggest the possibility of a bubble.
The top chart compares key facts for the Chinese and U.S. housing booms and the bottom chart compares the recent mortgage debt as a share of gross domestic product for both. While in both cases nominal house prices increased by close to 50 percent over a 5-year period, the differences are striking. The U.S. housing boom reflects over-consumption and over-borrowing, whereas the Chinese housing boom reveals large investment in construction and apartment holdings. Most of the “vacant” Chinese homes have been sold to private owners but are being held as investments alongside multiple other homes."
http://www.macrobusiness.com.au/2013/05/...-of-china/

If this happens, this will cause a serious recession in China and also affect economies around world. When this happens, Chinese investments in America will go down. We are looking 2008 recession again.
06-23-2013 04:34 PM
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bacon Offline
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Post: #2
RE: Chinese housing bubble and the possible consequences

Game/red pill article links

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06-23-2013 04:40 PM
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cardguy Offline
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Post: #3
RE: Chinese housing bubble and the possible consequences
I read this article a couple of years ago. And have thought China's property market is a giant bubble waiting to bring down the world's economy ever since.

http://expectedreturnsblog.com/is-china-a-bubble/
06-23-2013 06:16 PM
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Samseau Offline
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RE: Chinese housing bubble and the possible consequences
It's unclear to me if a housing bubble with hurt China.

Think about it guys. If a bubble pops in China, the same things will happen in all recessionary environments:

- Wages drop.
- Prices drop.
- Consumer spending drops.

But, given China's role as exporting goods, how will it hurt them if their wages drop? It will just spur more foreign investment.

If anything, a recession is better for them than prosperity given how they've set themselves up as the world's exporters.

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06-23-2013 07:33 PM
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kosko Offline
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RE: Chinese housing bubble and the possible consequences
I will just say that China is being used as a Boogie man. They still have more collateral in real wealth and resources to sell off if they need cash. Canada is in much worse shape with housing increases up at around 300% over a 10 year period in places such as Vancouver. Canada has dirty oil with bearish America as its only buyer and no sizeable collateral to off set needed cash infusions if needed. Toronto for a long stretch had more construction activity then fuking Dubai and yet nobody really talks about it. Canada has the most lopsided real estate market in the developed world. Are media does a good job of keeping people dillusional that they won't loose money if they buy a house. I've lost friends trying to give them housing data to get them to rethink getting into the market now and just hang out a bit. Some have even admitted I was right but still jump in due to family and peer pressure its amazing.

In Canada if out housing bubble pops (and already showing signs it has) we collectivity are looking at a hole of $800 Billion dollars. Sure China's numbers are more buzz worthy and massive but on a real per-capita basis its nothing compared to the mess we are in here. China's housing debt isn't almost 60% relative to their GDP... in Canada it is. China also has the ability to rush in at any time and fix the issue due to its control on everything internal. In Canada we are slaved to 5 huge private Banks that have put a massive tab on taxpayers that we have to pay once prices tank.

China puts everything into perspective long term. Many nomad cities of a few years have a shit ton of people living in them now. They do things different and I think we in the West like to poke fun at their style since they any time they do fuck up the numbers are just so large and astonishing. I am not worried about China as Canada's market will be in the toilet before Chinas will. China's actual RE projects many have been strategic tied together by... yes... speculation but also strategic military policy that nobody likes to talk about either. When China decides to go all in with it's chips in the eventual (and inevitable) conflict with the West, Japan and America for sole regional (global?... IMO NO) domination it intended those ghost cities to house people if Shanghai or Guangzhou get carpet bombed.

China still has the most gold holdings globally and it has the largest human resource capacity of nearly 300-500Million +/- of labour to utilize. All of this has real tangible value that we in the west with our hot air and monopoly money do not have. Japan, the UK, USA, Canada, etc would dream to have the mess China has now because they can realistically dig themselves out of it, with legitimate and real capacities versus the tapped out and imaginative capacities we have here in the west.

China's bigger issue is making sure its millions upon millions of single Men can get laid, and deter them from thinking revolution and full scale revolt. That pent-up sexual tension those men have... that will ruin China before this real estate bubble does. Not worried.
(This post was last modified: 06-23-2013 08:19 PM by kosko.)
06-23-2013 08:17 PM
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LeBeau Offline
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RE: Chinese housing bubble and the possible consequences
^ Co-sign on most of that Canada analysis.

Lost track of the amount of news "articles" that involve statements like "According to statistics released today by The Canadian Real Estate Association (CREA)"

Major papers like the Globe and Mail can't help themselves but to constantly publish pieces to try and play all sides.

The amount of debt responsibility that's been transferred or added to the taxpayer, through the Canada Mortgage and Housing Corporation (CMHC), is also a huge tail risk and a story that's getting very little in depth coverage.

Kosko that's unfortunate that you speaking the truth has created friction with friends, especially when you're bring up points in the exact manner a friend SHOULD.

I've had minor arguments with people but those who took my advice couldn't be happier as they are starting to catch on now.

Bigger lifesaver was regarding the Yen devaluation, for friends who had moved to Canada. Nice to know you saved a buddy hundreds, if not thousands of dollars just by converting some currency.
06-24-2013 01:13 AM
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LeBeau Offline
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RE: Chinese housing bubble and the possible consequences
Disagree on Kosko's China analysis

Keep in mind we are already starting to see the deterioration of a lot of those buildings due to the weak construction/design standards and rampant corruption. Incidents like the Wenzhou train collusion don't inspire much confidence either.

I don't believe it's a factor of long term military strategy but rather the reverberations from tons of local officials needing to meet targets for GDP growth. The easiest way to do this and employ many poor young men is through construction, as it adds to GDP and shows tangible "progress".

There is also less opportunity and transparency for investing in financial markets for the wealthier Chinese citizens. With more of a cultural focus on housing, it's easy to see why people have bought additional properties at home (even though they don't technically own them) and abroad (i.e. Vancouver, Toronto).

Also, a lot of this internal mis-allocation of capital is common in "emerging" markets experiencing large inflows, and even more so in those with corruption issues, or communist leanings. The Chinese government has serious concerns about inflation, and it's no surprise that they are recording huge spikes in the number of "mass incidents" (translation: riots, protests, etc.)

Though I'm not one to dwell on too much academic research when it comes to current markets, one interesting paper reported that for any country to get above a certain level of income per capita it had to allow it's citizens more freedoms, similar to the West.

This is another reason why I would not be surprised if we saw very unexpected changes in leadership or full scale Arab Spring style revolts in China and Saudi Arabia over the next 5-10 years unless the rulers offer more opportunities and rights for their citizens.
06-24-2013 01:45 AM
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Blackhawk Offline
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RE: Chinese housing bubble and the possible consequences
What are Chinese citizens legally able to invest in? Stock market? No. Equities? No. Bonds? No.

It's all government controlled. The only place for their money to go is their real estate market. Which is why it's risen so much. No where else for the pressure to go.

The Canada/US real estate markets are different animals. Their bubble isn't from speculation by investors with their own money. It's speculation from borrowing government money, further fueled by special government programs for families buying their primary home. It's all about low standards for loans, to shitty borrowers that will never legally make as much money in their lifetime as they can borrow from the government to buy a primary residence, and all the fraud revolving around these programs, usually with current title holders selling out to false (identity theft) buyers that get the government money, then disappear after the seller cashes out. And syndicates doing this over and over again in a lather/rinse/repeat process milking the government dry.

This is one of the problems with big government, centralized government, in the age of the internet. There's millions of crooks around the world trying to come up with systems that will fraud the government. Every time they find a way that works, there's more money to be made selling your system to other crooks than just doing the system yourself. When some guy figured out he could file fake tax returns with a tax refund and get a government check back, suddenly crime rings formed around the nation defrauding the government of hundreds of millions of dollars. In a matter of months.

The current real estate bubble in the US and Canada is the same. It's fueled by fraud. And the government bureaucracy is slower than a dinosaur to respond to its own predation.

"Alpha children wear grey. They work much harder than we do, because they're so frightfully clever. I'm awfully glad I'm a Beta, because I don't work so hard. And then we are much better than the Gammas and Deltas. Gammas are stupid. They all wear green, and Delta children wear khaki. Oh no, I don't want to play with Delta children. And Epsilons are still worse. They're too stupid to be able to read or write. Besides they wear black, which is such a beastly color. I'm so glad I'm a Beta."
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(This post was last modified: 06-24-2013 01:55 AM by Blackhawk.)
06-24-2013 01:52 AM
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LeBeau Offline
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RE: Chinese housing bubble and the possible consequences
Just to clarify, I can still agree with some of the points regarding the rise of China in the long term, like those brought up by Jim Rogers, but I believe they will have to go through a lot of short term crises.

Here's some relevant videos, if you aren't already familiar with these managers, they've been talking about it for years:








06-24-2013 02:11 AM
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avantgarde Offline
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Post: #10
RE: Chinese housing bubble and the possible consequences
Chinese people can invest in stocks and money market but maybe it is tightly controlled and a lack of trust in it.
06-24-2013 08:49 AM
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avantgarde Offline
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RE: Chinese housing bubble and the possible consequences
(06-23-2013 07:33 PM)Samseau Wrote:  It's unclear to me if a housing bubble with hurt China.

Think about it guys. If a bubble pops in China, the same things will happen in all recessionary environments:

- Wages drop.
- Prices drop.
- Consumer spending drops.

But, given China's role as exporting goods, how will it hurt them if their wages drop? It will just spur more foreign investment.

If anything, a recession is better for them than prosperity given how they've set themselves up as the world's exporters.
Well, China now is shifting to its domestic market, but export is still big. This would be really bad for internal developments.
06-24-2013 09:04 AM
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kosko Offline
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RE: Chinese housing bubble and the possible consequences
(06-24-2013 01:45 AM)LeBeau Wrote:  Disagree on Kosko's China analysis

Keep in mind we are already starting to see the deterioration of a lot of those buildings due to the weak construction/design standards and rampant corruption. Incidents like the Wenzhou train collusion don't inspire much confidence either.

I don't believe it's a factor of long term military strategy but rather the reverberations from tons of local officials needing to meet targets for GDP growth. The easiest way to do this and employ many poor young men is through construction, as it adds to GDP and shows tangible "progress".

There is also less opportunity and transparency for investing in financial markets for the wealthier Chinese citizens. With more of a cultural focus on housing, it's easy to see why people have bought additional properties at home (even though they don't technically own them) and abroad (i.e. Vancouver, Toronto).

Also, a lot of this internal mis-allocation of capital is common in "emerging" markets experiencing large inflows, and even more so in those with corruption issues, or communist leanings. The Chinese government has serious concerns about inflation, and it's no surprise that they are recording huge spikes in the number of "mass incidents" (translation: riots, protests, etc.)

Though I'm not one to dwell on too much academic research when it comes to current markets, one interesting paper reported that for any country to get above a certain level of income per capita it had to allow it's citizens more freedoms, similar to the West.

This is another reason why I would not be surprised if we saw very unexpected changes in leadership or full scale Arab Spring style revolts in China and Saudi Arabia over the next 5-10 years unless the rulers offer more opportunities and rights for their citizens.

The Chinese money dump in the Canadian markets is a myth and has been debunked. It was a racist push play used by developers to scare people into buying homes. They labeled Canadian-Chinese citizens as newcomers and foreigners hell bent on getting into the Canadian market. After the Hong Kong handover ? Yes large sums of cash were dumped in Vancouver but today foreigner investments only makes up 7-11% of the market. Developers were hiring Chinese actors to wait in lines for TV stories in Greater Vancouver, it's all a scam.

China cooks GDP via "growth" while I'm the West debt = growth, I put more faith in tangible production of real things. Also you can't discount the military strategy of it. Look at where these mega projects are strategically placed, overlay a map of the future trade and resource channels. They are building secondary nodes to feed into the larger centers not the opposite as we do here in the West. China expects large scale conflict in 10 years and they have planned everything from construction to arm strategy to be in a position of strength within that time frame.

Canada is still worse off on a debt-to-GDP ratio with housing. The USA has millions of homes kept of inventory by banks which has lead to a artificial dead cat bounce in the market. London continues to see legitimate foreign
Money flood in bumping prices to the point nobody will be able to afford to live there. All I'm stating is that there are places way worse. The China mess is large but is contained. I don't view it as the Knee cutter to the global economy. The USD or Euro will be, both with more dire outlooks then what's going on in China.

Look at what the Chinese Government is trying desperately to cover-up to know what scares them. Revolt and sickness scare them more. China has had a outbreak of a serious virus on many parts of the country. It gets little to no press and the Government works like clock work to censor it. Ive been in this game to long to know that when something is "hyped" look the other way. This story on Chinas bubble is a non-story look the other way to the EU politics fiasco with GB and what is happening in the USA with QE as all are more dangerous to the the global fiscal order then this.
06-24-2013 09:10 AM
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GameTheory Offline
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RE: Chinese housing bubble and the possible consequences
(06-23-2013 08:17 PM)kosko Wrote:  I will just say that China is being used as a Boogie man. They still have more collateral in real wealth and resources to sell off if they need cash. Canada is in much worse shape with housing increases up at around 300% over a 10 year period in places such as Vancouver. Canada has dirty oil with bearish America as its only buyer and no sizeable collateral to off set needed cash infusions if needed. Toronto for a long stretch had more construction activity then fuking Dubai and yet nobody really talks about it. Canada has the most lopsided real estate market in the developed world. Are media does a good job of keeping people dillusional that they won't loose money if they buy a house. I've lost friends trying to give them housing data to get them to rethink getting into the market now and just hang out a bit. Some have even admitted I was right but still jump in due to family and peer pressure its amazing.

[...]

http://www.crackshackormansion.com/

lolzzzzzzzzzzz
06-24-2013 09:20 PM
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Samseau Offline
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RE: Chinese housing bubble and the possible consequences
lolololololololololol

Chinese stock market down 20% YTD

http://www.zerohedge.com/news/2013-06-24...-feb-highs

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06-24-2013 09:59 PM
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xsplat Offline
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RE: Chinese housing bubble and the possible consequences
(06-23-2013 08:17 PM)kosko Wrote:  China's bigger issue is making sure its millions upon millions of single Men can get laid, and deter them from thinking revolution and full scale revolt. That pent-up sexual tension those men have... that will ruin China before this real estate bubble does. Not worried.

I like the idea that individual men can band together communally and have broad, revolutionary influence. It's happened in the past, many times.

But I utterly disagree with the manosphere meme that male sexual frustration is leading us, anywhere on the planet, to any sort of revolution, at any time in any future.

In China especially.

The idea is nothing but something to make guys feel like they are not totally powerless.

But they are. As a group. As a group men ARE totally powerless.

We are not going to fight the government, as a group. We are not going to fight society, as a group.

Individually men can have a good realistic chance of opting out of the system and increasing their personal value.

As a group, no, it's not going to happen. Wishful thinking.
06-26-2013 01:11 AM
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