If you’ve not already seen the study by Yongheng Deng, Joseph Gyourko, and Jing Wuu that appeared at voxeu the other day and you still think there’s not a problem with real estate prices in China, you might want to go read that paper. The one chart that stood out for me is below along with a conclusion that should strike fear into any recent buyer.
To provide some insight into just how risky prices and price-to-rent ratios are at these levels, we calculated what would happen if people began to expect that their homes would grow in value by only 4% per year. For Beijing, prices would fall by over 40%, absent offsetting rent increases or other countervailing factors.
![[Most Recent USD from www.kitco.com]](http://www.weblinks247.com/indexes/idx24_usd_en_2.gif)
China… the world…. all precarious at this point.
No, no. It’s different there. All 1.3 billion Chinese are multi-millionaires. They work seven days a week, twelve hours a day in factories and get paid $1 an hour because they LIKE it. Plus they are all good communists working for the greater good of the People’s Republic.
Mostly off-topic, but if you had to put $5 down on a Bend, OR, bet:
1) bottomed
2) sideways
3) more to go
I’m looking from afar, and while I think a little more sell-off is likely, my monkey brain fears “1.”
It’s hard to say – they might have another 5 or 10 percent to go or, if we get a nasty double-dip recession another 20 or 30 percent. I think you can rule out “1″ (as in, you’ll never see current prices again), but, given the propensity for government to prop up real estate values, I wouldn’t be surprised if you’re asking the same question six or eight years from now.
Thanks for the reply. I might head up to look around next week.
Could it be inflation — money printing by the Bank of China? What has the true rate of money-stock inflation been?
Since it’s in real prices this is already adjusted by inflation.
If we ever know a bit of what and how speculative the China market is, no matter it is the real estate or the stock market, or any other things material, we should understand that the fiscal stimulus of RMB 4,000 billion and most of this credit had mostly found their way to the real estate market, the equity markets or anything that could be speculative enough to make big money. Remember that all of the said excessive credit had not gone to help the private enterprises but mostly gone to the state companies that had not used the cash from the government to boost the productivity of their enterprises but had the money channelled to the asset price bubbles and one should wait for the real estate as well as the stock market bubbles burst unless the central government to use extreme measures to counter the asset price bubbles burst.
China is prospering but it is a speculative world and it is prone to asset price bubbles and for the past thirty years, China had been walking on a tightrope for its economic development and China is counting on the said asset price bubble cycle to flourish and it is a shaky world.