Chinese Property market:
Got this in the latest edition of a newsletter to which I subscribe, thought it might be of interest to some of the members here.

--And China?

--"Standard Chartered has told clients to prepare for a fall in property prices of up to 30pc in Beijing, Shanghai, Shenzen, and other large cities in China as the delayed effects of monetary tightening begin to bite. Stephen Green, the bank's China economist, said a glut of newly built homes were hitting the market just as buyers are restrained by higher down-payments and curbs on speculation."

--Global credit bubble equals misallocated capital and elevated asset prices. Central banks act to support by slashing interest rates. Levitation achieved. Gravity asserts itself. Asset prices fall.

--This is the world for which we're preparing an investment strategy. Mostly it's defensive. But not always. More on that tomorrow.



And this:

Isn't China going to power the world economy out of its funk? It's still growing at double-digit rates, isn't it?

Well...yes...but...

Reuters reports:
China's property market is beginning a collapse that will hit the banking system, Harvard University economics Kenneth Rogoff told Bloomberg Television.

Property transactions have dropped and prices are stagnating in the wake of steps in recent months by the central government to cool the market.

XuShaoshi, minister of land and resources, said at the weekend that he expected prices to start falling within a few months.

"You're starting to see that collapse in property and it's going to hit the banking system," Rogoff, a former chief economist at the International Monetary Fund, told the agency.

Not everyone agrees. Because home owners must make a downpayment of at least 20 percent and many pay entirely in cash, there is relatively little leverage in the Chinese property market.

"Despite the importance of the property sector in the economy, we believe that the deflating of this bubble should have only a limited impact on the real economy and the banking system," Nomura's chief China economist, Sun Mingchun, said in a report.

The Chinese-language 21st Century Business Herald newspaper on Tuesday quoted a real estate association official as saying government tightening measures were yielding initial results.

But prices in Tier-1 cities such as Beijing and Shanghai had not yet declined, he said, so officials needed to step up implementation of the measures, which include higher down payments, the end of mortgage rate discounts, curbs on purchases of multiple homes and restrictions on lending to developers.
And this from Bloomberg...

China's auto sales grew at a slower pace in June and a services- industry index slid to a 15-month low, adding to signs that the economy leading the world recovery is cooling.

Passenger-car purchases rose 10.9 percent from a year earlier, down from May's 25 percent gain, the China Automotive Technology & Research Center said today. The services-industry measure fell to 55.6 from 56.4, HSBC Holdings Plc and Markit Economics said in an e-mailed statement.

Today's data adds to weaker numbers in June for manufacturing indexes and a second measure of the services industry after the government cracked down on property speculation and as the effects of stimulus measures fade. A slowing economy could lead officials to delay returning to pre-crisis policies.

"It looks like growth will slow to 8 percent in the fourth quarter of this year with risks on the downside," said Paul Cavey, an economist with Macquarie Securities Ltd. in Hong Kong. "The government will be worried" at that point and may loosen policies, he added.

China may turn out to be a drag on the world economy, stay tuned.

I'm not too familiar with the property market in China, other then its seems a bit out of whack with what most people make in terms of salary. Correct me if I'm wrong, but I believe there's a serius disconnect with what properties are selling for versus rental rates for properties.

I understand that home ownership is incredibly important for the Chinese, but at some point there has to be some correlation between selling prices and rental rates.

Wow, some great development figures there! I am of the view that this is yet another alarming article that raises the awareness of China's growth and how much of the world's resources it is consuming. My view is that, the world is seriously running out of resources ( oil, land etc) thanks to the over-powerfull growth of China (and India).

I mean, "increasing car sales"... That's just GREAT for the environment and oil fossils.

does the china banking system depend on the normal supply and demand though?

remembering that china works abit different to the normal free capitalist market?

I heard Hong Kong stock market lost so many points because of the global economic situation.  That biggest HK land developer with the most expensive HK apartment complex was a big fraud to escalate land prices.  This cause big damage in HK stock market.    I heard rumor that rents only going up and up even as the Hong Kong economy lagging.

that's the key word... "Central government"

they decide whether they want the property prices UP or DOWN.

if they want DOWN, they stop all loans, like what they have done now. You can get a loan for your first house only.
2nd house = no loans, full cash ONLY.
this stupid rule cancelled out any investors.

So, how do you make money from chinese property prices going down?

If there's a CDO (Collateralized Debt Obligation) like in the west, it's not something that an individual can buy.

Wasn't there a long time concensus that the China property market is already on a enormous bubble that is bound the pop sometime?

China doesn't seem to be quite ready yet to become the world's economic superpower, but maybe after several years on constant growth and the faltering world economy, perhaps they will be conceded with 1a type of recognition.

i believe China is like a big family business, they can exercise their discretion to ensure protection of all citizens for fair and equitable opportunities to own property!

yeah hendersons developments or some name as such, i saw that on the news in HK.. obviously the HKSEC will investigate him and probably prosecute.

How do the rules work for foreigners. With the prices going down and the currency atprobably only going up o value may be a good bet.  Gather would be best to choose best neighborhood in major city and new condo building.