Greg Guenthner

You’ve seen the ghost cities before.

They stretch across the outskirts of dozens of major urban areas, criss-crossed by empty highways. The rows of modern skyscraper apartments are all sold to absent investors. There’s little doubt these scenes create compelling television…

But beyond, the gaudy, empty cities, China is now facing another property-related problem: housing slaves.

Middle-class workers in China’s major cities are reportedly shelling out upwards of 70% of their salaries for mortgage payments as they scramble to buy property in the face of rising prices. According to Bloomberg, the Chinese media has started to call them ‘fang nu,’ or housing slaves, “a reference to the lifetime of work needed to pay off their debts.”

Then there’s the investor class. Nouveau riche Chinese investors have gobbled up properties despite attempts by the government to put a lid on the red-hot market. Just this week, China instituted large tax increases on home sellers. The government is also calling on local agencies to institute price controls.

Yet no matter how much the government attempts to crack down on the housing market, it cannot suppress human emotions…

China is showing signs that it is entering the final, blow-off stages of its real estate bubble. Analysts and developers are sounding the alarm–but it cannot deter euphoric investors who have never seen real estate values dramatically tumble since the government changed property ownership rules 15 years ago…

Advance notice of this impending drop was on full display yesterday. The Shanghai Stock Exchange Property Index cratered nearly 10%. Stateside, the iShares Trust FTSE China 25 Index Fund and the SPDR S&P China ETF both dropped. All are recovering slightly today–but I would expect continued volatility moving forward.

If you’re betting on China through any of these positions, it’s time to pound sand. The sheer scale of China’s property binge and the telltale emotional topping signs are emerging everywhere you look. When it really begins to sour, the shockwaves could make our little experience with a runaway housing bubble here in the States appear mundane…

Greg Guenthner
for The Daily Reckoning

Greg Guenthner

Greg Guenthner, CMT, is the editor of the Daily Reckoning’s Rude Awakening. Greg is a member of the Market Technicians Association and holds the Chartered Market Technician designation.

  • Rusty Fish

    Once, you earned 3 gm per month to afford a 150 gm spacious comfortable
    shelter . Perhaps, property has soared to 500 gm and earning has only achieved
    a fold of inflation. The gap is widening inline with ticking of the debt clock, worldwide.
    In some part of the world, housing repayment carries forward to the next
    generation. So, that makes it a compulsory inheritance, the parents being slaves
    and their offspring automatically qualify slavery.

  • Pingback: Trackback

  • Pingback: Trackback

Recent Articles

Extra!
6 Reasons You’ll Love Being a Late-Stage Investor

Matthew Milner

When investing in a private company, there are two kinds of investors: early-stage and later-stage. And while early-stage investors have more upside potential, they're also exposed to far more risk. Today, Matthew Milner explains how you can be a successful later-stage investor, and still make great gains, with much less risk. Read on...


Video
How to Predict an Economic Collapse

Kate Incontrera

In his recently released book, A Viennese Waltz Down Wall Street, Mark Skousen gives the Austrian School's take on what triggered the 2008 financial crisis - and why you should be wary of the artificial boom that's driving the recovery.


Laissez Faire
Why Heartbleed Will Change the Internet as You Know It

Mike Leahy

The Heartbleed bug is a massive security flaw that could put you and your personal information at risk. And while there are things you can do to limit the damage, you haven't yet seen the ramifications of this security disaster. The Internet in the post-Heartbleed world won't look like anything you've seen before. Mike Leahy explains...


Big Opportunity in the “Baby Bakken” Oil Field

Matt Insley

As the U.S. "shale gale" nears its 10th birthday, it appears the America energy renaissance has outlived its critics. Still, it's natural to wonder whether all the big gains are behind us. Today, Matt Insley reveals the newest shale hotspot, and explains why there's still plenty of opportunity left in the U.S. energy boom. Read on...


Maestro
The Real Reason the US Media Hates Vladimir Putin

Marc Faber

The U.S., Russia, the EU and Ukraine all met in Geneva, where all sides agreed to halt all violence and provocations in Ukraine. But the news media are still taking an antagonistic stance toward Vladimir Putin and Russia. What gives? Today, Marc Faber explains the hypocrisy behind U.S. foreign policy... and the BS the news media are pushing about it...