Inside China’s Property Crisis

China’s property market is in crisis. Home prices are falling, developers are defaulting and people are angry. The worry is that a total collapse will bring down an already faltering economy. Bloomberg Originals explores how the real estate sector became such a mess and what the implications could be for the global economy.

#china #realestate #bloomberg

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[MikiCab]

I was in China in the 1990s and this was going on. I met some expats working for architecture companies and they said builders were selling entire floors of apartments to single buyers and no one was moving into the apartments. They also said builders were using the cheapest materials possible with zero insulation so the heating and cooling costs were enormous

[techcafe]

"Homes are for living in, not for speculating on." - Xi Jinping

I agree. The commodification & financialization of housing is an evil scourge on society.

[johndinsdale]

So, I think you just about managed to scratch the surface of the problems. Next time maybe look at who sold the land parcels, why property prices in tier 1 cities are artificially prevented from falling. Who holds the mortgages on the roughly 100 million unfinished apartments bought off plan?

[Maliceless]

A lot of valuable nuance here. Thank you Bloomberg Originals.

[mj]

The scary thing is that China's real estate investment cycling has been going on for several years now, and the debt continues to grow every time the debt is paid off with debt. And the sky is the limit. It's not just a limited number of real estate developers. Sixty-four major real estate developers, counting those in China, have such insolvencies. Other bright spots in China are not to be found, such as the high-speed rail system, which continues to swell with regular losses, and the semiconductor companies, more than 5, 700 of which have gone out of business.

[azmodanpc]

Those empty buildings would make for great dystopian sci-fi brutalist architecture for a TV series or movie.

[SubhadipSpeaks]

Indian developers were doing similar models of business, pre sales, using the money to buy to new land, not completing per sold projects.

The Supreme court steps in, created the regulatory framework nationwide. Parliament passed a law to create the independent statutory regulatory authorities in all states. Thats how the Indian real estate industry saved, consumer interest is saved and china like situation is averted.

[Fishmans]

In the long term, more affordable prices for housing are always better. The bubble was going to pop eventually, and it's better to have it deflate now than let it balloon into an even bigger problem later on. Tough luck for all the investors though.

[christopherdaffron]

When push comes to shove, Chinese companies will (and already have) simply default on foreign investors FIRST as a stop gap measure.

[tamtrinh]

their buildings look a lot like prisons

[idraote]

This happens when homes become a speculation when they should be a primary need.

[biondanishgenomeinstitute]

Just have a rule that nothing can be sold until its finished.

[whilewaitingforthemothersh]

47 industries are upstream and downstream of the real estate industry. It’s affecting everything and everyone there directly or not . Local governments have been cutting salaries to civil servants from office employees, teachers, bus drivers and on and on . 125 thousands teachers have lost their jobs due to demographic downturn and the dominos haven’t all failed yet …
One thing very important not mentioned is that the house buyers have no way out as walking away from their house investments isn’t possible because even if they walk away from their houses they are still liable for the rest of the original loan hence ending up with no house and still a mortgage to pay ! And same with unconstructed houses . The first payment comes when you buy the house NOT when you move in therefore they are stuck paying for a house that might never be built and best case scenario is worth 30 to 50 percent less then they paid for .

[keitatsutsumi]

There should be more emphasis on the differences between 2008 and this crisis. The huge difference being Chinese banks seem to have much less exposure to the Chinese realestate market compared to the US banks in 2008. US banks made bad investments in derivatives of subprime loans, which led to the first bankruptcies, then panic and bank runs. And these financial instruments were sold to many foreign investors as well, which is what made the recession so global.
The current situation in China, while bad, looks nothing like the 2008 crisis. These are defaults of DEVELOPERS, not financial institutions. The major concern would be a panic and bank runs, but even then the effects would probably be mostly domestic, since foreign exposure to Chinese realestate is nowhere near that of international exposure to US realestate in 2008.

[HKim]

Totally underselling the pain that is spread out due to the “debt” structure of developers.
Generally speaking, 1/3 of debt is bonds, 1/3 is pre-payments and 1/3 is debt to suppliers.
Sure banks are “protected”, but everyone else is totally f’d.
Also, the magnitude of debt. Just Evergrande and Country Garden have debt of close to 3% of GDP. When Lehman folded, their debt was about 0.5% of GDP.

[pjacobsen]

1:37 Look at that archival footage from Beijing 1995: New apartment projects selling for 1, 600/sqm. 25 years later, those same apartments would likely go for 90, 000/sqm; a 5, 500% increase. Real estate used to be one of the best, if not the best, investments you could make.

[ivobiancucci]

Starting to happen in Canada with Toronto and Vancouver leading the way home prices are over priced by at least 40%

[wumingkkk]

This has been going on for years. They have done these to themselves.

[samakolBanbol]

I wish Canada gets some of this and wish to see some real estate gamblers begging in the streets and taking horse tranquilizers!!

[KengCheong]

I love how this is really slapping the older generation’s idea of buying a house no matter how hard it makes your daily life.

It’s great.