Cross-posted from Investing in Chinese Stocks.
China’s real estate market has entered the greater fool stage, be on alert for sudden drop says the headline.
Centaline is out with a new report showing what has been a hot topic of late, the appearance of “land kings” (winning bidders who pay the highest price on record for a city):
Centaline Property May 25 released the latest report, as of May 23, Chinese saw a total of 152 land kings, but only 95 last year. Of the 152 kings, of the top 50, second-tier cities become the absolute main force, accounting for 72%, in Nanjing alone 13 appeared, but only 14 in first-tier cities.
Nanjing prices are said to have “no rational explanation.”
On the other hand, May 9 at the People’s Daily published an authoritative article also revealed a high level view of real estate issues, pointing out that the overheated real estate to be alert to the lessons. But the reality is that in May the major second-tier cities frequent the king, prices are way high, while related regulatory policies are late yet.
Local governments are making hay while the Sun shines and hoping to see a bit of economic development:
E-House Real Estate Research Institute researcher Xie Jinlong pointed out that, according to the study report, the entire real estate tax accounted for more than 50% local tax, which is a big cake for local governments is difficult to give up. Not to mention the economic downward pressure, solid industry development downturn and stimulate the economy in several elements, can force the point is not much, even by the local real estate industry welcome.
Hot money is fueling the rise as deposits in local banks soar:
Liu Xiaobo pointed out that at the end of 2015, Nanjing finance this balance of deposits, namely the total amount of funds ranked No. 9, but now it may have leapt to fifth or sixth. This means that housing prices in the first quarter frenzy, a huge influx of hot money, like 2015 in Shenzhen, a steady flow into Nanjing.
According to official data, Nanjing Bureau of Nanjing in February of financial institutions and foreign currency deposits amounted to 2.908258 trillion yuan, an increase of 23.1%.
By 2016 only Nanjing Bureau of Statistics data released in February, with February data for comparison, the city in February of financial institutions and foreign currency deposits amounted to 1.176396 trillion yuan, an increase of 18%; Xiamen balance reached 907.605 billion yuan, an increase of 20%.
The first-tier cities, Shenzhen, Shanghai, Beijing February the total amount of funds were up 18.2%, 15.2%, 7.7%. Liu Xiaobo analysts said the rush of hot money come and go, when they gathered in a city, the city’s housing prices there have soared.
If restrictions arrive, the final phase will be to clean out the second-tier:
For the above, Qi Junjie said that the property market has entered a significant greater fool phase, completely play capital. “If the second-tier cities to follow the first-tier cities restriction, that hot money will bypass, go to undeveloped second-tier cities, then to second-tier peripheral cites.”
Slowing money supply, slowing sales and finally a real estate tax will end this party:
Liu Xiaobo believes that the authorities in the May 9 statement, to return to the house residence features add leverage to the inventory practices to be negative, while broad money M2 growth from a recent peak of 14% down to 12.8%, the central bank new loans and social financing growth both dropped significantly, monetary policy in the “step on the brake the car .”
He judge, on the whole Chinese real estate bull market this round of policy basically come to an end, despite the hot urban housing prices are still rising, but it will not last long, one to two quarters after the whole market will cool down again, and the next round of restriction the policy came back in a hot second-tier cities.
Qi Junjie also believe that cities will face no market price case, because there is no real estate holding costs, the price will not easily fall, but the market volume will gradually cooling trend.
In addition, he believes that the real estate tax to be implemented once launched, will become the last straw the breaks the camel’s back.
“No matter how willing the government is trying to control it, investment will have a corresponding fluctuation cycle, like the stock market, often abruptly ending in a burst of applause.”
iFeng: 中国房地产已进入博傻阶段 警惕大热后突然下跌
