August 13, 2010
-- by Dave Johnson
This is pretty important, because, as we know, when a huge housing bubble bursts it takes an economy down with it. China's Coming Property Bust
So everyone recognizes that a correction must come soon, right? Not exactly. “I don’t see any bubbles,” 44-year-old Zhang Xin told Hong Kong’s South China Morning Post ( SCHPY.PK - news - people ). “The next few months will be a fantastic time to buy.”
Really? There were, a few months ago, 64.5 million urban flats that showed no electricity usage for six consecutive months. That’s one in four city apartments, enough housing for some 200 million people. The value of vacant apartments held by speculators is about 15% of gross domestic product. Beijing’s bank stress tests assume a 60% fall in property prices. In fact, official statistics show that property price increases slowed in July.
64.5 million empty urban flats now, but,
And there is more bad news for the residential market. Property developers, who are already building 20 million flats, have company. Local governments are constructing another 20-30 million, and other government agencies and companies are also building housing for employees.
Real trouble ahead, if China doesn't manage this properly.
Posted by Dave Johnson at August 13, 2010 9:16 AM
Dave, why is a bursting housing bubble a problem for China? It's not a democracy and it's not a capitalist economy. The Chinese government doesn't answer to voters or to bankers pressure.
Anyone who makes too much fuss will simply disappear or be shot in the street.
So, why would the collapse of a housing bubble take down the Chinese economy, an economy that just does not face the pressure of Western economies?
I agree with zak822, the collapse of a housing bubble wouldn't necessarily damage the Chinese economy as far as politics go. At least not in the way we just experienced. With that said, it would be incredibly naive to think it won't affect not only their economy, but the World's economy. Like it or not, China is the up and coming superstar when it comes to the economy. China has a bunch of hurdles to jump and they seem to be headed for eventual disaster in every direction but the sheer numbers all but guarantee them a top spot in the World's economy, if not the top spot. Dave is right, now is the time to pay attention.
A housing bubble here affects China since it means our economy is failing and all our debt that they're holding loses its value.
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