China Home Sales Down 50% In a Month

by | May 17, 2010 | Headline News | 13 comments

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    China has been the investment darling for the last couple of years. As US economic woes continued to mount and the EU ran into debt problems, many an analyst continued to talk about China as if it had decoupled from the rest of the world.

    The Chinese government, much like the rest of the world’s industrialized nations, injected billions upon billions of stimulus into their economy, sending auto sales, home sales and stock prices soaring.

    Chinese citizens, with an average income of roughly $4,000 a year, piled into the aforementioned assets in droves, looking to flip property and paper in the spirit of capitalist speculators here in the US.

    But, like the US, the dream of profits for the citizen proles will soon come to an end:

    Authorities have tightened restrictions nationwide on advance sales of new property developments, introduced new curbs on loans for third home purchases and raised minimum down payments for second homes.

    The Beijing city government has gone even further, limiting families to one new apartment purchase and barring people who have not paid taxes or made social security contributions in the city for one year from getting home loans.

    “Sellers have started to lower the prices,” said Hu Jinghui, vice general manager of 5i5j, a real estate agency chain that has around 600 outlets in eight cities across China.

    “But the buyers are still waiting.”

    Since the capital put in place the austerity measures on April 30, prices have dropped an average 10-15 percent, with the number of home purchases slumping by 50 percent, according to Hu.

    Jack Guan, a securities firm executive from the coastal city of Qingdao, searched last year on the outskirts of Beijing for his first home, but said he could not make a deal as prices “went insane”.

    [source: Breitbart]

    China’s asset appreciation was due not to any sort of real, sustained growth from increased consumption of Chinese goods abroad, but government stimulus. Sound familiar?

    If global stock markets, bond markets and economies tank in the latter part of 2010, we suspect China will also feel the pain of their government’s tightening of lending policies and capital flight from risky Chinese assets.

    China’s recent rise in real estate prices is akin to what we saw in the US in the mid-2000’s and is nothing more than an illusion.

    We would expect Chinese asset prices to take a hit in the near-term. As trend forecaster Gerald Celente pointed out recently, it’s no time to gamble now. Speculating in stocks or real estate in the US or abroad is a dangerous game, and one’s focus should remain on preservation, rather than growth, especially if we’re  talking about retirement accounts.

    However, we’ll note that because of China’s large population and internal consumption, as well as export expansion into new markets, they will decouple at some point in the future. While the rest of the world crumbles around them, the Chinese, with massive reserve of not just US dollars, but manufacturing capacity and an as of yet unknown store of precious metals, may be able to better weather the storm than western nations.

    Thus, in an effort to diversify wealth, considering well run Chinese companies that cater to internal Chinese interests, such as wireless carriers, agricultural farms, industrial construction companies and energy firms, may be good investments after the next round of crashes. We will, however, warn would-be investors that you are investing in a country with a communist political government, so there is always the risk of manufactured corporate earnings, government intervention into personal assets, and changes in the law without consideration of how those laws may affect your wealth. Oh wait, we’ve got pretty much the same thing here in the US – so have at it.

    China will grow, and likely overtake the US as the largest economy in the world within the next decade or two. As an American, it’s difficult to make this suggestion, but the numbers don’t lie, and unless some massive global war were to take place, the trends for the next few decades will see China grow exponentially.

    But in the short-term, we wouldn’t be too excited about China. They’ve created a bubble over there and it is going to deflate somewhat while the rest of the developed nations see their bubbles popping.

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      13 Comments

      1. Paul Revere

        Have the Chinese contact Bernanke, Geithner, and Obama today.  The U.S. government will buy these properties.  

        The loan terms are as follows:

        1) any amount over a trillion taxpayer dollars 
        2) zero percent interest
        3) no collateral or liens required
        4) no obligation to pay back the loan
        5) Obama reserves the exclusive right to bend over for Chinese dignitaries for himself. 

      2. GodSend

        Here’s the deal (for China):

        China will surrender all its Treasuries to America in exchange for:

        Disneyland
        Disneyworld
        The National Parks

        If they squawk, we’ll throw in Illinois, New York and New Jersey (including their public pension systems and public employees!)

        No more DEBT! 🙂

      3. Tony

        The worldwide collapse is gaining momentum.  Everything is falling right into place.  Hope everyone is prepared!

      4. GodSend

        “Ashes, ashes – we all fall down”

        or, if you prefer: “Humpty Dumpty…”

      5. Jonny V

        Why the hell do they want Disneyland or New Jersey for chrissakes?  They’ve got Walmart!  They’re bleeding us dry!

      6. GodSend

        All I SEE! is black swans in all directions!

      7. GodSend

        They like Mickey Mouse and Donald Duck! NJ has Atlantic City and NY has population density – they feel at home there. Haven’t you noticed the busloads of Chinese here? Maybe we should throw in Nevada, too (Las Vegas). They are avid gamblers!

      8. Jonny V

        Mickey Mouse and Donald Duck are gone away.  Been replaced by Manuel Mouse and Donald Trump.  Guess the joke’s gonna be on all those chinamen, huh?

      9. manos

        It seems that China is now entering the 2008 bublle.
        Should we send them back the crap that they were selling us?
        One crapy doll for one dollar 🙂
        m.

      10. GodSend

        No matter how big America’s problems are, (and they are BIG!) China’s problems are several magnitudes greater. When (not if) the various Chinese bubbles explode in the faces of around 3 BILLION people, most of whom are unskilled factory workers and farmers, miners, etc., slaving away for pennies a day, and their export markets are rendered dead, how you’re gonna keep ’em down on the farm, after they seen Disneyland and had a Big Mac? I suppose they will all join (by invitation) the MILITARY – and invade Taiwan – and then some! Maybe they’ll have another “Cultural Revolution” and knock off a few dozen million?!

        It sure seems like an old-fashioned war (WWIII) will solve a lot of problems! It’s either that or an “ALIEN INVASION” (don’t laugh).

      11. manos

        Godsend,
        Unfortunatelly you’re right about the war. Every major war we know solved many problems, especially unemployment.
        But the major gain of every war, was the innovation used later in peace times.
        Time will tell.

      12. Paul Revere

        Obama is dumber than hell.

        He’ll opt for war,  just like his predecessor Doofus Bush did. 
          

      13. GodSend

        Paul Revere:

        ObamaRahm-a will do EXACTLY what he is told to do by his Zionist Slimeball handlers – just like Bush-it did! If not, someone will “find” his authentic Kenyan birth certificate on the WH lawn – or worse!

        And Yes, THEY (who LIVE!) want Americans to fight another war for them – just like Iraq and Afghanistan, only Iran will fight back and A LOT more Americans will die! Why? Because THEY think one drop of Zionist Slimeball blood is more precious than 70,000 or so gallons a day of gushing Yankee blood.

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