The Chinese property market

Find below a useful background document on the Chinese property market from Jones Lang Lasalle. I could pick some holes in the macro analysis but I still found it reasonably balanced and a useful primer.

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Comments

  1. That reads like the consensus view. i.e. urbanisation is driving demand, price/income ratios don’t matter, and there is very little leverage. Very Chris Joye in fact.

    I like stuff with a few more on-the-ground anecdotes, not because they’re more accurate, but because they give you a sense of what’s happening well before it shows up in the official data. Like this…

    http://www.bloomberg.com/news/2011-12-02/real-estate-prices-fall-in-china-inciting-anger-and-applause-adam-minter.html

    Click through to some of the links, translate to English, and read the comments. If you think Aussies are upset about high house prices, we have nothing on the Chinese!

    • Their house view is turning, but it moves slowly. Ironically, it is harder to do when you live there…

      Also, this is a public report document from a real estate agency. So of course it is consensus. Their client presentations and discussions may differ.

  2. I think that’s fair to say. But reading between the lines, I thought it was less bullish than it appeared. There was an absolute certainty about policy-maker resolve vis-a-vis popping the bubble and it was one of the more conservative forecasts I’ve seen about Chinese easing…

    • “property sector, which accounts for 12 percent of GDP”

      yeah right try like 60-70% of GDP. That is one thing they got wrong

  3. Come on, the “planning gain” racket in China will cause “Asian Crisis II” any time now. Why is the mainstream economics profession SO SLOW to pick this, after all the property bubbles and crashes they now have as evidence?
    Empty apartments, and millions of people in slums who COULD AFFORD the apartments if it were not for the “planning gains” already pocketed by well placed CCP officials, leaving the “greater sucker” holding overpriced property that will have to give him a massive haircut before it will sell to actual occupants.
    (In the West, this racket is given a fig leaf of respectability by calling it “urban growth containment”).

  4. What has to be noted is Jones Lang Lasalle has a vested interest in the property market in China, if there is strong negative commentary by Jones Lang Lasalle the Chinese industry will not use their service, the same issue happened with the French company 家乐福 in China, that resulted in a stop sell of that company for a period of several days, due to inappropriate comments made by the President of France in 2010.
    Questionable independence of any report from Western companies based in China, are clouded in conflict of interest between the actual truth and the required relationships needed in China for profitability.

  5. Too bad the residential units don’t rent for 50 cents a day, which is about all the average chinese worker can afford. No doubt the powers that be there will nationalize them all in the near future and move the peasant workers in for free.

    It’s on the cards here in Oz as well but in the form of rent controls. Lock in rents then recycle any owner profit back to the occupants via their welfare payments. The banks let the other part owned properties go to foreclosure. They don’t care, they don’t hold the mortgages now anyway. They were all sold to the aussie superannuation funds and other parties.

    And the mortgage insurance? Well Glenworth was spun off from GE the parent company a few years ago. (After looting out all the up-front fees of course.) Then it was floated on the exchange and bought by super funds etc. It and its fellows will be allowed to go bankrupt and the super funds will take the hit without a murmur. That’s right, the senior officers of the funds have been well paid for their complicity and future silence.

    People buy houses during a massive bubble, the debt is sold into their retirement savings fund, and the only insurance companies that can save are technically bankrupt and owned by them too. What a scam, you couldn’t make this stuff up if you tried lol.