The South China Post reports ‘Golden Week’ Property Sales Plunge in Major Chinese Cities.
Property sales in China’s major cities saw one of their worst “golden week” holidays in years, as buyers held back amid a slowing economy and tight restrictions on mortgage loans.
Sales of new homes in Beijing dropped to their lowest level since 2014 during the week following the National Day holiday, according to data from the property information portal Zhuge.com.
By area, sales of new homes in Shanghai plummeted 86 per cent to 5,000 square metres, while the capital saw a 92 per cent plunge to 2,000 sq metre, according to data from Centaline Property.
Clement Luk, a director for east China at Centaline Property, said the home-buying mood has been dampened by the tightening of mortgage lending and the prolonged US-China trade war that discouraged spending.
“People do not want to commit in big investment now, like purchasing any homes, as market sentiment has cooled quickly since March,” he said. “Most owners prefer travelling during golden week holiday instead.”
“Deals are increasingly difficult to conclude unless owners are willing to cut selling prices at big discounts,” said Guo Yi, chief analyst at Beijing-based property consultancy Heshuo Institute.
Beijing Dilemma
Beijing faces the dilemma of all speculative markets: because most real estate buying is now driven by expected price increases, when prices credibly stop rising, buyers disappear and prices begin to fall. Price stability isn’t a real option.https://t.co/quNKXtC8qX via @scmpnews
— Michael Pettis (@michaelxpettis) October 8, 2019
When property speculation ends, property bloodbaths begin.
Mike “Mish” Shedlock
Good for the Chinese, who may get a bit more house per hour of labor than before.
Good for the Chinese first time buyers, but no so much for those who have dumped their life’s savings into housing on the advice that real estate is “safe”.
It’s always good an economy as a whole, that those who dump their life savings into a chewed up piece of gum, lose that money.
As the only alternative is, that others are forced, at de facto gunpoint, to keep propping the gum piece up, in order to keep up the childish, and massively economically destructive, pretense that the piece of chewed up gum some dunce paid a million for, is somehow getting more “valuable” over time.
Which is exactly, to a tee, without one lick of difference whatsoever, what is happening in China and The West alike, wrt their housing rackets. As well as the similarly government theft-and-transfer dependent rackets centered around stocks, bonds, “insurance”, so called “Intellectual Property” and the rest of the nonsense which combine to make up the undifferentiated idiocy known as financialization.
If the trade war were a bonafide reason for plunging real estate sales in China, then real estate would have plunged in the US as well since the US is the other half of the trade war.
It was starting to plunge but the FED smashed rates down to nothing and there are a lot of other games going on right now which are helping to slow and even level-off the decline. A lot of places in CA are 5% off their peaks this year, despite all the massive interventions.
I don’t know about China but I drive around all of Los Angeles nightly and see all the high-rises that were finished a year or two ago still sitting almost empty and begging for tenants…while everyone is stuffed to the rafters inside of 1940’s studios and bachelor apartments. It feels a whole lot like 2007, just perhaps a little less frenetic than last time, but still really, really insane.
I know exactly what you mean!!! And it ain’t just LA! Seems every city in this country (USA) has brand spanking new, multi-colored, whimsically jagged-contoured buildings asking for WTF monthly rents, all no more than half filled! Yet everyone with average jobs (or who have a sense of prudence about them) are just scrapping by in their parents’ place or a more frugal, downtrodden joint.
Markets aren’t supposed to work like this and I would love insight as to why and how long the charade can continue.
It would all be crashing down right now if it wasn’t’ for the sudden drop in interest rates last year and all the other banking shenanigans going on designed to keep the music playing.
China overbuilt, China way overbuilt. All the other reasons are meaningless unless they explain how supply overshot demand.
“When property speculation ends, property bloodbaths begin.”
…
Yes.
There might be a sticky price stalemate for a period …. then down they will go.
“experts” in US were wrong in 2006 / 2007 that market will plateau for a while then onward and upward.
I’m curious to know how long their government and central bank will take a page (or five) from the US governments’/Fed Reserve’s playbook and keep that sucker pumped up.
“market sentiment has cooled quickly since March,”
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I’m not buying the Trump needs the trade deal more narrative.
I listened to a China based analyst this weekend (long drive). He was commenting on the trade talks. Essentially said he didn’t think the Chinese would give much ground until the real estate market collapsed.
“By area, sales of new homes in Shanghai plummeted 86 per cent to 5,000 square metres, while the capital saw a 92 per cent plunge to 2,000 sq metre, according to data from Centaline Property.”
A square meter is about 11 square feet. 5000 square meters is around 50 small homes. Something got lost in translation on those area numbers, or the data is strange.
Good catch. I’m guessing it’s thousands of square meters. Either that or a metre isn’t what we assume it is.
I agree, good catch. I would expect that their properties are much smaller than we are accustomed to in the US. Let’s say they are 500 square feet, which would be perhaps 47 square meters. If that’s the size, 5000 square meters is 106 homes, still a very small number for such a big city.