China Property Collapse Has Begun

China Property Collapse Has Begun

For some reason this story feels like Armageddon to me.

Down a similar line of thought, it is quite shocking to see how the Chinese middle and upper classes are spending money. Could it be that they are experiencing some kind of "euphoric expenditure" for lack of better words? They have been thrust with unimaginable wealth and are now tasked with handling such wealth.

At some point though, if you don't take care of your money, it will be gone. How long before the rich middle and upper class Chinese families start emptying out because of the amounts of money the younger ones spend?

Just go to Macau, any day of the week. The Rolex store in Wynn Macau sold out twice in one day last year February. There was one young gentleman who came in and bought 2 $250,000 watches with his black amex.......

When does the money run out because surely there is no room for continual spending unabated?

I saw the 60 minutes report on that a couple years back. I don't even understand what people were even thinking. Why were people building hundreds of empty buildings which didn't even seem to be selling much then? I don't understand that "investment" mentality at all.

Doesn't even make sense as a good scam.

Imagine if they nearly doubled the number of casinos in Vegas without having one of the new ones even open? That's about how much sense it made.

Quote: rxwine

I don't even understand what people were even thinking.

The ultimate goal of theChinese government’s modernization plan is to fully integrate 70 percent of the country’s population, or roughly 900 million people, into city living by 2025. As of 2013 , only half that number are.

That is 450 million people in only 12 years. Or 35% to 70% in 12 years. Compare that to taking decades to add millions of people to urban areas in the Western Hemisphere. It took the USA 60 years to go from 40% to 70%.

Also consider that much of it was done through international immigration rather than moving people already here. Also notice how the rate slowed when immigration stopped during the Great Depression.

year urban - rural
2010 80.7% - 19.3%
2000 79.0% - 21.0%
1980 73.7% - 26.3%
1960 69.9% - 30.1%
1940 56.5% - 43.5%
1920 51.2% - 48.8%
1900 39.6% - 60.4%

Over 10 year periods we normally added an average of anywhere from half a million to four million per year to our urban population
1900 - 1910 1.18 million
1910 - 1920 1.22 million
1920 - 1930 1.49 million
1930 - 1940 0.55 million
1940 - 1950 2.21 million
1950 - 1960 2.84 million
1960 - 1970 2.44 million
1970 - 1980 1.74 million
1980 - 1990 2.00 million
1990 - 2000 3.89 million <======= peak decade of absolute urban expansion
2000 - 2010 2.33 million

========================

In 1900, the population of Mexico City was about 500,000 and Guadalajara was 100,000 .

In 1900
New York city, NY *................ 3,437,202 (8,336,697 in 2012)
Chicago city, IL................... 1,698,575
Philadelphia city, PA.............. 1,293,697 (1,553,165 in 2012)
San Francisco city, CA............. 342,782
Los Angeles city, CA............... 102,479

Look at the death rates in China circa 1959-1961 (three bitter years) as a result of Mao's social engineering to turn China into an industrial nation. Now the social engineering is to turn China into a nation of consumers.

A lot of people don't know that when you bought
a house before WWII you didn't expect it to go up
in value. A house bought in 1910 for $3000, was
still worth about $3000 in 1935, plus added inflation, so
maybe $4000-$4500.

Bob Hope started buying LA real estate in the 40's
when it went for a song and they laughed at him.
In the 60's when it shot thru the roof, nobody was
laughing anymore.

The Chinese have the attitude of 'build it and they
will come'. Maybe, maybe not. Like Paco said, the
reason the US is so strong is we grew in increments,
over a long period of time. Office buildings were
sold out before they were built. Suburban housing
tracks on Long Island were 90% sold when they were
built in 1950. The Chinese are doing it backwards,
very foolish to assume anything when dealing with
supply and demand.

Quote: rxwine

I saw the 60 minutes report on that a couple years back. I don't even understand what people were even thinking. Why were people building hundreds of empty buildings which didn't even seem to be selling much then? I don't understand that "investment" mentality at all.

Doesn't even make sense as a good scam.

Because it isn't about "investment" it is about keeping the masses working and keeping the country peaceful. Like a 1990s dot-com as long as the bank keeps shoveling money into it then work can continue. If the banks are told by the government to loan the money then they keep shoveling. The bad debt ratio in China is going to make 1997 look like a picnic. But with over 10% of their GDP in USD reserves they probably are not living in fear.

Quote: Evenbob

A Like Paco said, the reason the US is so strong is we grew in increments,over a long period of time.

The 1990's were jarring socially.

urban population - foreign born population increased
2000's 23.3 million - 8.9 million
1990's 38.9 million - 11.3 million
1980's 20.0 million - 5.8 million
1970's 17.4 million - 4.5 million

The Chinese are talking about an increase of urban population by 450 million over 12 years drawing almost entirely upon their own rural population.