Beijing housing sales falls 35% – Iron Ore falls through $90

Data released today from Beijing’s municipal bureau of statistics show housing sales in Beijing has plunged 39.4 percent year on year to May, a further sign China’s property market is cooling. Sales of commercial buildings, which include residential and commercial property, slumped 33.6 per cent over the same period.

Today, the Australian Financial Review reported 23.3 per cent of China government-subsidised housing is vacant. The paper reports on data from Professor Gan, the lead researcher on the China Household Financial Survey suggesting there is about 50 million homes vacant in China – a vacancy rate of 22.4 per cent. This is double what the United States had during the sub-prime crisis.

According to a survey conducted by Soufun published last week, total land sales across China fell 45% year on year to May and 19 percent for the month. It reported some cities recorded no land sales at all.

As a result, Iron Ore – a raw material in steel used to build China’s homes and commercial buildings – and Australia’s largest export has been hammered this year. China’s residential property sector absorbs 24 per cent of worldwide steel consumption. The Iron Ore price fell 2.1 per cent last night, plunging through the $90 US metric tonne. Bloomberg reports Iron Ore reserves at China’s ports are up 31 per cent year.

» Beijing housing sales slump 35% – The China Daily, 17th June 2014.
» China’s real-estate market sees land sales plunge – Market Watch, 9th June 2014.
» One-fifth of all China’s subsidised homes are empty – The Australian Financial Review, 17th June 2014.


  1. With the China Ponzi now unravelling, it won’t be long before all those thousands of vacant apartments in Melbourne and Sydney will have to be liquidated by their Chinese investors. They will be desperate in the hunt for cash to meet creditor demands, particularly from China’s shadow banking system whose only pledged collateral are huge piles of illiquid iron ore rapidly falling in value.

    We are about to witness the greatest Margin Call in history and an even greater stampede out of Australian property.

  2. Don’t Worry Be Happy…… for the banks. The government already has a $380 billion bailout package in place for the big 4 should they have liquidity (solvency) problems. As they hold 80% of mortgages it will become interesting when the valuations sink below borrowings. So when we lose all the equity in our homes we simply stop paying the mortgage. As it will be impossible to foreclose on all the underwater houses we will have a rent free home.
    The Australian Dream just gets better and better!

  3. China has a vacancy rate of 22.4 per cent and Sydney is at or about 1.8 per cent. Absolutely no problems there for apartment prices in Sydney given there still remains more buyers than property.

    China reminds me of the USA during the GFC when the Americans all threw the keys back and walked away from their respective properties. Their needs to be a much deeper inquiry into Australian real estate given I’m pretty sure the Chinese now want to buy/live in Australia so they are happy to walk away.

    It would be fascinating to see the NSW Stamp Duty receipts data extrapolated to reveal exactly what is happening given overseas buyers play a much greater role thanks to the many loopholes and farcical penalties that don’t appear to be applicable anymore.

  4. @In Vino Veritas, where did you get the 380 billion number from? That’s over $15,000 for every man woman and child!

  5. @ Vino Veritas, I don’t think life in Australia will be at all dreamy for anyone under the scenario that you paint.

  6. @ John Theodorou. Yes John it would be sad to become a nation of renters. The point I am making is that we must demand more say in the decisions of the finance sector/RBA. This $380 billion bailout for the banks is an enormous misallocation of tax payers funds which should be used to create jobs. In Oct 2008 the US had a TARP bailout of $US700 billion which was used to refinance their banks. It was very controversial and took 2 sittings of congress to pass it. As George Carlin said about the American Dream “You have to be asleep to believe it”

  7. @admin and Vino, good god, this is far worse than I thought. Talk about moral hazard! I suspect there won’t be anywhere to hide when this all comes crashing down. Heck, we already know the government can simply take our money directly from the banks. What a way to wreck a perfectly good country.

  8. @ Vino Veritas.

    I think you’re underestimating how devastated the economy will be in a scenario which would result in defaults at all levels, which is very much like the one playing out in Greece, Portugal and Spain – but without the money printing hijinks being able to slow things up for a few years.

    Think rather Argentina 2000 default, where the entire middle class virtually collapsed overnight, when they had their life-savings confiscated by peso devaluation, only on turbo. The result – mass unemployment, economic collapse, rampant crime, rioting, looting and state repression.

  9. @Vino
    Wasn’t one of our four major banks was rescued by US Fed during GFC 2008? I guess this time they wanna solve it here.

  10. @Jas2u
    I did not hear of any of the big 4 being directly bailed out by the US TARP program, but when you consider that they are owned 36% to 49% by HSBC, JP Morgan and Citibank I suppose indirectly they all were. It is however interesting to reflect on the size of the US bailout ($US700 billion) which rescued 8 enormous banks plus loans to AIG plus 3 Auto makers and community banks. Compare it to our Committed Liquidity Fund ($380 billion) for only 4 Oz banks. Rather generous don’t you think or does the RBA know something we don’t?

  11. To put it in plain language, it seems a tad inconsistent for people to insist that our housing market is based on strong fundamentals when politicians and bankers are positioning the tax payers to bail out the banks if it does go belly up. I’ll have to remember to point out this fact to anyone who insists that thing are rosy in the Australian property and banking system.

  12. @Vino

    I don’t believe the Aussie banks were directly bailed out, but they sure did borrow heavily from the USA banking system to sure up their balance sheets: Look out if the USA raise rates lol.

    And I thought that the $700b bail out was the one dished out by bush, then obama gave them another $1.2 trillion? I could be wrong on that, but I’m almost certain there was a second go from obama:

    You must also remember that the USA had personal debts no where near as big as ours. We are well over GDP just on RMBS without considering all the other personal debt:

    Don’t be fooled: Australia is the most heavily indebted country in the world when it comes to personal debt: Who’s gonna bail individuals out? Sure the banks will get bailed out: But do you think they will do a debt wipe on individuals? lol.

    Hold on when it goes: It will get crazy

  13. JUST WHEN YOU THOUGHT IT COULD NOT GET WORSE. We find our government is involved in SECRET talks with the US and EU to establish a Trade in Services Agreement (TiSA) This will 1.Allow free access of offshore banks etc to our markets & RBA services even if they have no branches here.
    2.Free transfer of financial data to countries with weak privacy laws 3.Freeze all current financial regulation in this country. 4. Allow binding dispute resolution outside our judicial system. 5.Free entry to all financial services IT workers. To name a few. One of the main reasons we survived the start of the GFC in 2008 was our regulated financial markets. This agreement will open the doors and place Australia’s economy in the hands of the global financial cartels.

  14. @In Vino Veritas – I don’t know if regulation really saved our banking sector – it was the First Home Buyers Boost and $900 handouts that did it.

    Bankwest collapsed on the 8th October 2008 behind closed doors, but the government helped facilitate a buyout [firesale] by the Commonwealth Bank. This panicked the SPBC – Strategic Priorities and Budget Committee – the gang of four made up of Prime Minister Kevin Rudd, Deputy Prime Minister Julia Gillard, Treasurer Wayne Swan and Finance Minister Lindsay Tanner.

    A couple of days later on the 14th October 2008 the First Home Buyers Grant was announced that saved the rest of the banking sector from Collapse. For the record, Treasury did not support the FHOB.

    As for if the TiSA is a good thing or a bad thing, I’m not across all the detail, but the IMF says our banking system is the most concentrated in the world and this poses a systemic risk – The ANZ, Commonwealth, Westpac and NAB hold 80 per cent of the countries banking assets and 88 per cent of residential mortgages.

    Surely opening Australia up to competition and chipping away at the big fours dominance would be a good thing. The other thing to note, is our big four also own most of New Zealand’s banks – both Australia and NZ have two of the world’s largest housing bubbles. It would be good if our banks were diversified into less risky markets, rather than having all their eggs in two of the world’s largest bubbles.

  15. @Pete
    I agree with you that financial regulations alone did not save us from the worst of the GFC in 2008. However the situation was very different then because we had a mining boom, full employment and cash reserves. Undoubtedly the cause of the mess we are in now is the deregulation of the US banks. After the abolition of many regulations including the Glass-Steagall Act which stopped banks gambling with depositors money the finance sector started to dominate the real economy so that the bankers/Wall St became wealthy beyond their dreams while Main St went into recession. The TiSA agreement is about bringing us in line with the deregulated US environment. As the saying goes “If you do not want anybody to know what you are doing perhaps you should not be doing it”
    Thank you WikiLeaks for sharing the details of this agreement with us.

  16. I am currently trying to get more information on the bail in/out ramifications. It is open knowledge that debts are sold on the open market under multiple names and schemes.

    However as happened everywhere in the US during the great depression and to a limited extent here (Aus) if your bank folds you loose your savings.
    But if you have a loan with a bank, will the lost savings cut out the loan, or will you have lost your savings and still have the debt?

    Nothing in any of the literature covers this situation, so am I wrong in the scenario that you loose savings but still owe the loan?
    That is basically what happened in Cyprus and similar legislation seems to have been passed by most governments now.

  17. You have to hand it to Australian governments.

    10k for asylum seekers to return home and free money for foreign nationals to prop up housing.

    People from foreign countries must laugh their asses of at us!

  18. @Ralph, I’m also quite interested in what you ask. I don’t believe that debt as a commodity was quite so prevalent back then. Credit wasn’t nearly so easy to create back in those days and the borders offered some protection against individual national collapses. Probably the tyranny of distance shielded Australia in that regard.

    I doubt we’ll be so lucky this time around.

  19. @Steve-If you have the evidence please mention it to A Current Affair, Channel Seven News etc. etc. The more voters know about the rotten corruption of the Labor/Liberal party monopoly the better they realise the waste of voting for them.

  20. @ Arthur

    Yep! I wasn’t gonna name them (cos I wasn’t sure which ones it was) but there we go. The two culprits I was suspecting.

    Banks are more dangerous than standing armies, first by inflation and then deflation our children will find themselves homeless in the streets…or something to that effect….

    On another topic. I see that the government in it’s wisdom has removed the tools for your trade cash payments (free market? lol) and introduced interest free loans. YAY!

    Now, not only will UNI grad’s have debts, but our tradies will suffer four years of low pay (three bellow the poverty line) then qualify with an interest free loan also! I bet every tool salesman in the country must be rubbing their hands together: Young kids with interest free money to burn! BURN!

    What a flipping disaster this joint is

  21. The Australian version is a little more sombre.

    News Limited has published The Australian version for the more sophisticated reader who can cut through the bullshit – it talks about real prices and how in some cities – e.g. Adelaide, prices will decline by 4 percent in real terms.

    News Limited has then published a watered down version in its tabloids for Mums and Dads, so as to not scare them. In the more basic article, reaching out to the dumb and dumber, it removes any mention of real terms – i.e Adelaide is to rise 5 percent – or “limited growth”. Personally, if your investment doesn’t keep up with inflation, I would say that is “negative growth”

  22. @Pete

    You don’t know the half of it. I get a new couple every day now. 50’s with all (90%+) their money in housing in WA.

    All negatively geared.

    They don’t know what getting positively geared investments means until I say to them, whats better. I give you 10c. Or you give me 10c and I give you 3c back.

    Then it starts to click for them that every year they need to get positive returns. That unit that’s sitting there negatively geared eats $200 a week from their bank account and they get zero gains or returns.

    I’ve had one person cry this week. They cant seem to pull the trigger to when you tell them ‘here is what to invest in. Here is where the money is. Get your cash out of Australia ASAP. Follow stimulus packages’

    That’s all they know, their entire working lives from 25-50 nothing but good times. Now there’s bad times and they don’t know how to stop the losses. Poor baby boomers. Just as dumb as everyone else. “last year I got 2% capital growth…. what do you mean I lost money! I got gains!”… idiots.

  23. @jessieJess,”Follow stimulus packages’”

    This is indeed a curiosity. Nowadays it’s the central banks that the markets look too for new opportunities. It’s a massive elephant in the room that no one wants to acknowledge.

  24. @Jessiejess

    Yep. I have no doubt you see this daily. It’s almost like the entire globe of Mums and Dads have no comprehension of what investment is. American’s, English, Chinese etc. It’s just a scramble to “own” property.

    A good mate of mine put it into perspective for me the other day: He had a marriage break down almost 12 months ago. He’s cleared his head, settled the assets. Now, he earns >$100,000 p.a., and not in an easy environment either, he works pretty hard for that. ‘I’m gonna save up a big deposit (like $100,000) and then buy myself a house seeing I gave the last one away”. That’s a sound plan you would think….But then you learn that his view is that EVERYTHING other than housing is too expensive. Car repairs, boat repairs, living costs, food, clothing etc. etc.

    It is this exact belief that housing is the pinnacle of human existence and that everything else is overpriced that has created a national economy where 50 companies (not businesses) close everyday….350 per week…….

    Between house/land prices, and government regulated utilities (water, power, car rego, land tax, payroll tax etc) being pushed to the stratosphere, it’s the elephant in the room that no one want to discuss. There is no money left for consumption. No money to be spent at the corner store. No money for a weekend away.

    Of course, business is in trouble in Australia. No concept of investing has created a terrible economy. I often ask people with small business what their return on investment is….”Nah mate, it doesn’t work like that. I earn a wage” So you put your own capital into purchasing a job then….No wonder the franchise industry is massive. Guys paying to have a job. It’s crazy.

    I always find it funny that a person with shares is seen as a risk taker and that the money isn’t theirs until they sell their stocks….Yet investment property owners who believe they got a 2% gain are in the money……Can you sell a property with a 2% gain and make a profit after expenses? lol, of course not so it’s a loss. Factor in capital costs….Then factor in opportunity costs…OMG.

    Like Jessie says, they are just as dumb as everyone else. These negatively geared clowns better hope the economy hold’s up, because in a nuclear situation, where the central bank system is dismantled and market forces dictate interest rates (that’s right…..I, as an owner of money, want a return on that money that co-relates to the risk in the economy…Like at the present time, I believe that my money should be worth >10% to someone, not the 3% that is forced upon me by the RBA). How on earth will mom and pop ‘specuvestors’ be able to survive if in tough markets interest rose as it should, and falls in good markets? Because they have been trained to exploit the system as FUBAR’D as it is.

    I don’t know why we are even having this conversation TBH. One only needs to get familiar with JAPAN, and it’s economy. They’ve seen this happen. They are dealing with the consequences of it……..Over 25years after the event. LOL. There is an entire generation in JAPAN, who will take on the bare minimum of debt for any purpose….Their housing continues to set new lows, their government debt continues to exploded. Their employment conditions continue to worsen. WTF? Can no one in power see this? Can no one learn from this?

    Of course, there are a few that see it: But there view will never be popular enough to be democratically elected. But that’s another topic all together.

    I guess my point remains the same as always: You will not be protected by the government, the banks, your boss or anyone else. it is up to you to educate yourself beyond what the GOVERNMENT SPONSORED education system pumped you full of. Look beyond what the bank is offering you. Look beyond what you union or industry association is offering. Look beyond the monetary system your familiar with. Look beyond popular opinion and what “everyone” else is doing.

    Two facts that you CANNOT ignore: They are as sure as gravity:
    1: In the entire recorded human history, over 6000 FIAT currencies have all failed and become worth $0. A suitcase of notes at $0, still equals $0.
    2: Central banking/fractional reserve system, steals tomorrows labour, ingenuity and innovation to pay for today’s (or yesterdays) government programs. This system will also always fail. For the burden created to be paid by the future will always exceed the value that can be created.

    I’m not saying dig a bomb shelter. But I am saying: Get your s#*t together.

  25. Agenda 21 sustainable development and world de-population.Continous wars,all over the planet,glorified in Hollywood movies and children’s video games.All directed by the banksters cartel that control the NWO war machine in all countries worldwide.Today the corporations rule!Their leaders are not human.Therefore,as Michael Jackson said”they don’t really care about us”.We humans vastly outnumber them reptilians.Unfortunately,they control the monster of nuclear power and all military on earth.There must be more to it,especially when Jesus said”Love your enemies,even when they persecute you”.This battle,against the force of darkness,is not limited to this planet or this lifespan it is eternal.Walk proud in faith and truth.

  26. @ Jessie

    Not a week goes by without me pondering in amazement at the misunderstanding of debt and the real costs of having a house.
    I think its just simply to hard for them to change the way they have been thinking for the last 25 years.

  27. We are living in their system.Their truth is arbitrary and can be formed by consensus.2+2=5?Less than 6%unemployed in the lucky country???Australian cities are all dominated by corporations.Small business is almost extinct.Leasing shop in suburban metropolis,of Sydney,$600 to $700 per day.How many loaves of bread, or cups of coffee,do you have to make and sell in a day?What about material costs,staff,and all other overheads,taxes and fees.On top of that,paying of a house,family,children,cars,food,bills,insurances and the massive government fees.Reality is out of balance.We are all overloaded with debt.What happens when jobs go?Meanwhile,politics economics and the FiRE sectors are a tragedy of deception and lies.

  28. Pre-Olympics in 1998,on a site at Bondi Beach,a Jewish developer told me something very significant about speculation in property.He said,that although he had 2 million dollars he owed the bank 10 million.Today the only developers in Sydney are corporations,doing multi storey apartment buildings near train stations.The middle ground developments have all stopped.What does that tell us about the local economy and small business?Corporations are using a global workforce,not just in construction,but everywhere.When you are out and about,in suburbia,have a good look at who is working?Bet none of them make award wages.Those poor exploited new migrants.They don’t come here,via Christmas island(just below Indonesia).They come here at Sydney airport,on 457 visas,thousands daily.Fact.Do you know how far Christmas island is from north west Australian desert coast.All diversions and spin, my dear friends.

  29. It’s sad but what are you going to do…

    They won’t listen unless you promise them you’ll invest their money into australian Realestate. Forget the 10,20,30% returns in other markets. Aged 40 and above? Forget taking advice and pour all your eggs in the 1 basket.

    You think seeking advice from someone who isn’t 30 and has a lotus is enough incentive for them to go ‘hey… This chick probably knows what she’s doing….’ But they will walk out and never call and go buy se crap unit 30km from the city in a suburb with no jobs becuase they saw that the Sunday times said it was a good place to invest. Then they come back to me because it’s been 5 years of negative gearing and no capital growth and the units falling apart as they tend to becuase they are always built cheap and fast.

  30. @ Jessie

    I sooooo get you. I got smacked down HARD when I told a family friend in 2005 that listed property trusts were a time bomb. They didn’t tell me they were geared to the hilt on these either….GFC hit, and then the sob stories…”I have to work another 5 years now”

    Guess what mate? I don’t cause I got more than ever…and I’ve never geared….Done it without property…but that sounds risky to them.

    If you really want to know how screwed up the finance world is, I know a bloke who was stealing (sorry charging admin fees) some $5M P.A. to tell people to buy Centro Shares….at $10….OMG.

    Lambs to the slaughter…They pay stupid fees, and then loose their capital….But me, the small country town boy, with no qualifications has shat all over their returns…But cause I don’t have a finance degree, I’m not worth listening too……

    But….Hows this for credibility….I caught up with an old school friend the other day. He got the scholarships, went to uni, put in the hard yards, long hours, brown nosing etc….He is now VP of an international banking arm in London….This is exactly how he greeted me: “So, how’s Matty? The bloke who was investing at school before I even knew what it was?”

    Too true. The facts are this: I choose not to get a job in finance because at the end of the day, that’s what it is: a job. I’ve chosen to CREATE wealth through business. It’s been a hell of a lot harder so far. But the difference is, in another 10 years, my mate will be ringing me, wanting to put clients money into my companies…… Who’s the sucker then eh?

    Jessie, It’s hard to deal with these idiots I’m sure. But your dealing with humans. Pad your own nest, if you can help a few along the way great! But, unless your pedalling crap, most don’t want to know about it…..

    Think Macca’s make the best burgers? Nike the best shoes? Subway the healthiest meals? Boost juice the best drinks? No, it’s about human behaviour. Most humans AREN’T even aware of their behaviour. They never stop and think, what the hell have I done? Been doing? Nope, they say “The jone’s have a new boat….It’s that property they have in QLD…We need one too!”.

  31. @matty

    Spot on. The brains have fallen out of society..

    Let’s display our wealth status by building a trendy design winning concrete and glass box, putting plantation shutters in the windows and buying the X5 to collect the kids from around the corner. Lemmings I tells ya. Going into massive debt just to keep up. Just because that’s what everybody is doing..

  32. If our country is negotiating agreements on our behalf in secret is that a sign we are being screwed? The facts of the Trade in Services Agreement (Mentioned earlier) are not to be released for 5 years after implementation. If you think you will not be affected note that it contains a draft amendment which seeks to abolish public pension funds.
    We also need to look at another secret agreement being negotiated The Trans Pacific Partnership. This little gem is seeking to stop the PBS from offering generic drugs and subsidies.
    I am not against agreements between countries which improve the living standards as long as they are transparent.

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