SOS China Housing Next to Crash!

Some of the facts from James Chanos (he is a year or two early, as usual):

1. Supply over demand in a big way;


2. Broken window policy, tear down a city and rebuild;


3. Prices in Shanghai and Shenzhen is 40x its household income;


4. Many rich own few units, disregards yield and hoping for capital gain;


5. 60-70% of GDP in China is construction;


6. Bank credit growth is about 35%, guess where did it goes, state governments (of course there is arguement that consumer paid 30-40% deposit);


7. China stimulus is about 14% its GDP (USD4trillion), one of the largest in term of percentage, chances are high for misallocation of resources;


8. Fixed asset investments are too huge for comfort i.e. properties, which do not generate cash flow if unoccupied;


9. Similar things happen in Dubai, build it first, the demand will come;

MyView

"This time is different" theory is incorrect. What is the justification of investing for capital gain when supply exceed demand? Properties never drop? That is exactly said in USA, prices of properties had not drop over the last 63 years. What about Japan in 1989? Demand will fill up the empty building and overprice building? Japan will continue to grow perpectually? What about Dubai?

Well, it is just another "musical chair" game. Well, some takes longer to stop, that is all, but they eventually stop, one way or another. I think the trick here is not so much it takes 63 years to pop like in USA, USA prices double to triple in 2000-2005, couple with a lot of derivatives. Japan land prices tripled from 1986 to 1991.

The problem is that when the music stops, the speculators/gamblers will be in for a shock. Not many area that a Chinese can put their money anyway (stocks or properties). One may argue, most Chinese paid 30-50% cash deposit, hence, no worry, well, yes, they can enjoy the music longer than others that's all. What happen if they are unemployed, can they live in 5 unoccupied condos?

Centralised planning is good? It only takes 9 elites in China to make the government policy, how efficient is that. American takes 10 years to build a bridge, China takes 3 years.

Urbanisation will solve the problem? Well, lets do more research on this.