Concerns on China’s property bubble

Written by admin on March 4, 2013 – 7:15 pm

1.5 per cent was wiped off the value of Australian stocks today, in part on the news the Chinese government is tightening regulations to help contain China’s Housing Bubble. The Shanghai Composite fell 3.6 per cent dragged down by some construction stocks falling as much as 10 per cent.

Australia has been one of the benefactors of this boom, supplying resources to help build these empty cities.

America’s 60 Minutes has just aired a story on China’s property bubble, dubbed the largest housing bubble in history.

China turned to fixed asset investment to help offset collapsing demand for its manufactured products during the GFC.

» China’s real estate bubble – 60 Minutes, 3rd March 2013.

» China moves to curb property speculation – Macro Business, 4th March 2013.

» Stocks slump on Chinese slowdown fears – The Sydney Morning Herald, 4th March 2013.

» China property bubble close to ‘Tipping Point’ : Zhiwe – Who Crashed the Economy, 28th September 2011.

» Is China’s Construction Bubble ready to Burst? – Who Crashed the Economy, 25th June 2011.

» China extends stress tests to steel & cement – Who Crashed the Economy, 6th August 2010.


Posted in Australian economy, China | 19 Comments »

19 Comments to “Concerns on China’s property bubble”

  1. LBS Says:

    The funny thing is the China bulls will turn this into BS. I dont care what anyone says. Debt is Debt and when you build this much stuff and no one is using it or buying it then it will not end pretty. Imagine what this will do to Australia, Canada, Brazil, Russia etc…. All those countries have gotten on the coat tails of China and are going to pay dearly for putting all their eggs into one basket.

  2. AverageBloke Says:

    Hmm, I agree that the Chinese Housing Bubble will burst but I disagree that China’s economy will collapse seeing that every conceivable consumer item is made there or will be made there.

  3. DX Says:

    @LBS

    Cant agree more.
    China is going down, and we are going down with it. so is the Canada, Russia, Brazil etc…

    @AverageBloke

    because of the fast rising expenses (including salary, tax, transport etc), European factories are moving out to other Asian countries, Japanese are closing down their factories, and Americans are moving their factories back to the State.

    and local factories are closing down because of high debt and less order from the whole world.

    also, over investment and high debt are huge issues for China at the moment.

  4. Glenn Says:

    We have been getting our ‘stuff’ from China for a long time well before mining started to kick off in Oz. This is a given. However, the driving force behind our mining boom is China’s construction boom. And when construction slows, so will our exports. To depend on this destructive industry to keep our country afloat is lunacy. The sooner it grinds to a halt, the better. I’m guessing the million dollar question everyone wants to know is when will start the slid begin???

  5. MrV Says:

    The only thing more sickening than seeing this malinvestment, is seeing some smug American walking around gloating about it.
    This asset bubble is a direct result of Federal Reserve money printing and the currency peg.
    From the Chinese perspective at least they will have the property, rather than accumulating even more worthless paper treasuries.
    I expect the Chinese middle class will have to take a huge haircut – the upside is the govt will probably give surplus property to the peasants in some sort of debt writeoff/forced rebalancing.

  6. Rupert Says:

    Stupid, greedy, misguided idiots. It’s astonishing how utterly foolish people are. Come on Australia, how many more clues do you need. Get out of property investment – it’s unsustainable.

    @AverageBloke – maybe if we started making stuff ourselves while at the same time cutting our consumption of things we don’t need and don’t want – maybe then China’s economy will collapse. If no-one has any money, then spending stops! Then what?

    I’m off to feed the chooks and water my tomatoes ;-)

  7. AverageBloke Says:

    Thats a nice idea Rupert the only problem is that if you to cut back and only buy cheap essential items you’ll probably find that those items are made in china.
    China has the cheap essential consumable goods market all sewn up.

  8. LBS Says:

    MrV
    “This asset bubble is a direct result of Federal Reserve money printing and the currency peg”

    So your blaming Chinas property bubble on the US are you kidding me. That has to be the worst comment I have ever heard and the most laughable.

  9. Mr Ed Says:

    The China market is a bubble, on a bubble, on a bubble….

    http://www.cnbc.com/id/100521104

    Apology in advance for the gross analogy, but it’s one giant hemorrhoid just waiting to explode!! (sorry again)

    Projection today on the front page of the AFR is iron ore back to $50.00 per tonne.

    That’s it – game over!

    Massive, massive, correction coming.

    Can manufacturing save us? No!
    Can retail save us? No!
    Can tourism save us? HUH? Only if the rest of the world doesn’t get hit.
    Can the farmers save us – Hmmm doubtful – they’ve all been screwed and bought out
    Can the service sector (slavery sector) save us? No!
    Can the mining sector save us? Don’t even want to go there……..

    Australia – the lucky country…………but that was before we sold our soul……….

  10. MrV Says:

    @LBS

    No I’m not entirely. But the countries are joined at the hip through poor policies. The Fed prints, but those dollars arent’ creating inflation in the US. It does in China though. If China has fixed deposit rates, you can hardly blame people for speculating in property to try and preserve wealth.

  11. BotRot Says:

    The AFR article mentioned in Mr Ed’s post (number 9.);

    Caution in China a blow to miners
    http://www.afr.com/p/business/companies/caution_in_china_blow_to_miners_Kcfkuwk6v7nUTfjEbuwLQJ

  12. Rupert Says:

    Property speculation is a mug’s game. It makes a very small amount of people very rich, and many of us did well out of property ten or so years ago, but the party’s over and more fool anyone who gets suckered in.

    Alas, I have little more than vintage wine and memories.

  13. Fooey Says:

    Well, China can make all the goods it wants it seems we’re not wanting to buy them:

    http://www.theage.com.au/business/victoria-slides-into-recession-with-sa-tasmania-20130306-2fkeq.html

    At least they’ve admitted we’re in recession.
    And when China buys our country we can thank Government and leaders of business for building up their country in the name of greater profits.

    Maybe I’m just ranting. I don’t know. Does recession affect house prices? :-/

  14. LBS Says:

    @MrV

    China is printing just a much as the US if not more. Look at he amount of money they are pumping into their own economy. It has nothing to do with the US. China is digging their own hole just like the US is digging their own.

  15. Matty Says:

    @LBS

    I have to agree with MR V on this one.

    When the worlds reserve currency prints…Inflation is created. Whether that inflation appears immediately or not is trivial.

    Since the USA have been printing world food supplies have skyrocketed in price. Yes, some is due to the shift to corn crops for fuel, yes some is due to the massive drought in the USA agriculture sector.

    Presently, Australia is mostly shielded from this inflation as our Aussie dollar as risen so hard and so fast.

    When our dollar plummets, we will see the results of this world wide inflation, through all imports: steel, clothing, food sources, consumables etc.

    It’s human nature, that as money is printed/created we spend it more freely, resulting in inflation.

  16. LBS Says:

    @Matty I appreciate what you are saying but do you and MrV not understand that China is at the printing press just as much as the US if not more. China and the US are going to be the ones who created all this inflation for countries around the world.

  17. DX Says:

    “…80% of consumers saying now is a good time to buy…”

    fake data or people are just stupid. i wonder who paid for this survey though.

    http://www.propertyobserver.com.au/residential/housing-market-sentiment-rising-with-80-of-consumers-saying-now-is-a-good-time-to-buy-rp-data/2013030759782

  18. Craig Says:

    Historical trends: Trade wars, currency wars then world wars ~ Gerald Celente

  19. MrV Says:

    @LBS, Yes I understand that, by definition of having a currency peg China is printing as much as the US is.

    However they are allowing a gradual appreciation, but too much too quickly will result in their exporters going bust, so it is a fragile situation that China-US is linked into.

    Ironically the only solution I see is the that Chinese middle class become more consumption orientated, but their household consumption of GDP is heading in the wrong direction.