> prices could collapse 90% (they won't), and it would only affect speculators and people who bought their first home in the last 5 years
How do you arrive at that claim? ~78% of all household assets in urban China are held in residential housing ownership. A 90% housing price collapse would be beyond catastrophic to China's economy and household wealth across the board. In rural China, residential housing values represent ~65% of household wealth.
China's household assets being so extremely concentrated to housing is unique among major economies. In the US, the residential real-estate market represents closer to 35% of household assets (in the UK it's around 50%).
Financial assets are only 12% of urban Chinese household assets, compared to 43% in the US.
China can't afford anything to go wrong in their residential housing market, much less a 90% price decline.
On the surface this seems hyperbolic but its true. The area I am at has seen wealthy Chinese investors buying up property in the new developments and then leaving it to their children to manage. It's almost impossible to buy a house here in the sub $300k range due to the rapid buy up and flipping they're doing. Most of them don't sell either - they rent, leaving people here in perpetual rent cycle without the ability to own property in a decent area.
I don't understand why this comment was downvoted--my understanding has been that a major component of rising housing prices globally is Chinese investors wanting to move their money out of the Chinese economy and into something they perceive as more stable, less corrupt etc.
> After it popped, housing prices started plummeting.
Prices haven't plummeted in China. Sales volume has seized since the red families control the real estate agencies. They have added more incentives, like easier access to hukou, and have eliminated limits on how many homes you can buy.
> 2. China is going through a weird demographic situation. The younger generations are significantly fewer in number, they will need fewer apartments to live in.
That's not really the issue. I doubt the younger generation can afford it. The problem is where the wealth is going - as in those with the $$$.
> The demand side is mostly people buying second and third units as investments.
No, at least not always. At some point you weren't allowed to buy more than 1 or even use your funds openly this way.
So to wrap up - those with wealth lost or have lost trust with China / the government and are withdrawing at alarming rates, e.g. to overseas. Due to how COVID was handled and many other cases where your wealth could just disappear - people now rather keep their $$$ elsewhere - not back "home".
The original argument mentioned China as a country that does not have a housing shortage. Somehow you just decided that the poster is suggesting we transition our system to a complete free for all, unregulated market. It's unclear why or how you arrived at that conclusion.
Also, the Chinese have been simulating the housing sector to encourage domestic growth. The Chinese housing sector did not grow out of control just due to lack of regulation. It was also financial stimulus and incentives to encourage building.
So, you just pounced on that other commenter, accused them of something they didn't say, and despite believing that you understand the Chinese housing market you actually have no clue. You are literally the Dunning Kruger effect manifest info a hacker news commenter.
>On the other hand, China's deposit requirements for houses are draconian. Think 40% down.
Think about that, it's even worse. In the US if your mortgage goes bust your bank takes more loss than in China where it's the home owner. And the home owners were regular middle class people trying to save their money from inflation AFAIK. Now it's likely to lose >30% value overnight because of the bubble. They had real-estate prices comparable to Europe and US with income nowhere near that so the IMO bottom is very deep. You don't think that's going to cause unrest ? There are already protests about this. Add to that protests about inflation and other social problems China faces.
I don't think it's going to end well, and that's going to have huge implications for the world economy. And potential unrest are just going to accelerate flight of capital caused by increasing production costs.
> Underlying all this is the simple fact that China can't allow real-estate prices to decline significantly. Politically, homeowners have come to expect their property values to rise continually in a one-way bet. [...] Rather than run those risks, China is simply ramping up development.
Isn't ramping up development to increase housing supply exactly the way NOT to keep housing prices high?
> Even in a so-called second-tier city like Jinan, a 100-sq.-meter apartment would cost him about 2 million yuan ($297,000). Yan, who makes roughly 6,000 yuan a month working for a local environmental nonprofit organization, is only able to afford half of that, despite years of saving and generous support from his parents.
The article then goes on to talk about massive oversupply in the housing market. At the end, it mentions a 20% drop in housing prices in some places, but the article also mentions that cities responded to slowing housing markets by removing a price cap on units.
How is housing so expensive in the first place? Is it because of speculative investment?
>upper-middle class Chinese person looking to secure assets outside the purview of the authoritarian government they are forced to live under will pay a premium
I think this plays such a significant role in the motives behind the foreign investment that even if housing was going down they would still make this trade.
Many homes are being bought out by the Chinese elite. They are desperately trying to get their money out of China before the Yuan devalues or recession strikes.
The same is happening in Hong Kong, Australia and New Zealand.
>There's also considerable evidence that China's housing bubble has burst along with this economic shift. But the bizarre nature of China's housing market has hidden this effect for a while.
We get a lot of bizarre financial news about China over here. The other day there was some sort of corporate bond default (I believe it was China's first, if you can imagine that) that pundits on Bloomberg thought was the start of the end for China, as if businesses don't default for some reason or another, all the time.
The fallacy is in comparing the Chinese housing market to that of the US. China manages (or at least is trying to) real estate prices, and much of the inflated price kicks back to the government as a form of consumption tax which is used to fund further infrastructure development. This housing infrastructure is important when millions of people are moving from rural to urban areas.
Who knows if these policies will continue to work, but there is no doubt they are currently working. There has never been a growth story like this, and they are still only 1/5 the GDP per capita of the US.
I don't agree with either statement at all but the second statement seems predicated on the first. That is, some people bought in a bubble the Chinese created and they lost their savings when the bubble popped and the Chinese stopped buying. This does not at all resemble the dichotomy of, damned if you do or damned if you dont, like you seem to be implying.
Again I do not agree with either statement even remotely. I haven't done any serious research on the current housing market and dont harbor any feelings or ideas on it.
> affordable housing is in the interest of everybody except property developers.
it is, but it's also complicated as the problems are quite a bit different in China then in the US
the reason there was a bubble in China was because they sold (barely) affordable (apartment owned, not rented) housing to a huge amount of people while not producing it. Like they financed it similar to a snowball system. Group B buys housing but pays for the housing bought by Group A then Group C pays for Group B etc. But at some point it fell apart and people realized the housing they should have gotten "soon" isn't being build (or stuck in a partial state) and the company has no money anymore. (Kind oversimplifying the whole thing.)
To top that off there are (state build) ghost cities which have cheap appartments and acceptable building build quality, the problem is there is nothing there, no jobs(!), no supermarket, bus, people, "anything", if you are unlucky even electricity might be cut of in parts of it, (also I guess for rent not apartment ownership). (But there are also enough examples of western media reporting about ghost cities messed up because turns out just a few years later it wasn't a ghost city anymore.)
And to make that worse it's not just Evergrande. It outside of the areas with a lot of central government focus there where many cases of houses building companies which had money issues trying to pretend everything is fine by cheeping out on building cost to a point where houses build that way are basically unusable. Through from the outside it looked like there is still progress. Issue with that is, it is really hard to guess how bad it is, pro-china media most times doesn't mention it and if it says it's a rare exception and/or videos are fake, anti-china media says it's bad to a point it's everywhere, and you find little in between. And both sides are known to lie a lot.
People can't afford housing because Chinese are buying up all the houses.
>price goes down
People lose life savings because Chinese are not buying up all the houses.
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