How China's property bubble burst

Desperate property developers in China have resorted to gifts like new cars, free parking spaces, phones and other consumer goods to attract homebuyers and boost flagging sales.

These incentives are just the tip of the iceberg in a crisis involving hundreds of billions of dollars in home builder debt, trillions in local government debt and at least a billion empty apartments.

But it wasn't always the case. Since China's economic liberalization in the 1970s and housing reforms in the late 1980s, locals have flocked to properties as the investment vehicle of choice over alternatives such as the stock market.

The property and construction boom helped fuel China's – and the world's – economic growth for 30 years. By some estimates, property in China was worth $60 trillion at its peak, making it the biggest asset class in the world.

Developers like Evergrande and Country Garden got extremely rich in the process.

As property values soared and Chinese households piled on more debt, Beijing attempted to cool its housing market and rein in risky business behavior. Spooked, Chinese consumers soured on property purchases.

But the country's property crisis has deeper roots than speculation and uncontrollable debt. Watch the video to find out how China's property bubble burst.

#CNBC #China #Evergrande #Property
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[CNBCi]

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[john_wick]

The bubble finally burst...just 10 years late

[johnl.]

Gold, Car, ….we’re offered not to affect the official sales price to hide the decline in prices.

[aliali-ceyf]

homes should not be used as investments for high profits. essential to live items should be regulated so its accessible to all

[Infernal_Elf]

fantastic summary. many news outlets negate the fact that local goverment stuff like roads hospitals and such was funded by selling property. Both building and maintenance.

[chinhuawang]

I think collecting property tax, establish personal bankruptcy law, a credit system and buyer pays when the building is complete would be the best way to get out of this mess. There will be pain but it will getting the market stabilized over the time.

[Taber]

take a gold bar from a ponzi company, probably find out it is gold plated only

[mylesgray]

The amazing thing about this bubble is it was able to thrive for years in a place with stable to falling population.

[bradH]

As one who has worked for a decade at one of China's leading real estate companies, I can confirm that for every $100 spent on housing prices by consumers, at least 70 to 80 are taken away by the government in the form of land concession fees and various taxes during the transaction process. This is essentially a form of rather covert heavy taxation. If you don't buy a house, you won't be able to enjoy basic public services in your city of residence, including education for your children, medical services for yourself, etc. Essentially, if you don't buy a house, you're treated as an "illegal immigrant." However, after taking such a high proportion of residents' income away, has the government used it efficiently? In China, where there is no reasonable supervision mechanism in place, this remains a big question mark.

[fahmidamiah]

The culture in China and also places like Singapore and HK are highly revolved around property as a commodity. It's such a shame because there is a lot of poverty in China too and many people need homes. Every country needs to stop using shelter as a means to riches. The Boomer and Gen X generation have been particularly guilty of spreading this disease, including in the UK, where the property market is absolutely diabolical, leaving the younger generation with poor housing with rocket sky prices. This needs to stop.

[MyLifeOfficial]

Great reporting CNBC! 👏🏼👏🏼🙌🏼👌🏼

Well done and keep it up! 👍🏼

[rvwyqhg]

China’s housing market is more likely to be a gambling house. Before the bubble bursting, the way assessing people whether they were rich enough was the amount of apartments they had. The government manipulated the property price increasing from 2015 to 2020 dramatically, which was called “rise in price and disposed of inventory”.

[TheGodpharma]

The gold bars were probably gold-plated lead.

[paragonfl]

Thank you for your clear explanation of the Chinese system and how it lead to the problem.

[davidhynes]

The Housing Bubbel finally burst, its called greed.

[joerudnik]

They don’t OWN the home. They lease it for up to 70 years. The mortgage starts when you sign the papers. If it’s never finished, you will pay and then it reverts to the local government.

[Beokurisu]

Your overview of property and housing history is a valuable contribution to the media storm on this topic, thanks.

[chewie]

Many of these apartments are incomplete and not livable. Now, they will never be completed.

[ritaisland]

When is the usa $34 trillion debt going to burst?

[samsonsoturian]

3:20 Correction: Most of the leases are for under 70 years, but it varies from city to city, from year to year, and what it's being zoned for.