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…
for The Daily Reckoning
Greg Guenthner, CMT, is the managing editor of The Rude Awakening. Greg is a member of the Market Technicians Association and holds the Chartered Market Technician designation.
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.
Wolf Richter updates the latest wave of defaults and bankruptcies in the energy sector. As you'll see, even Janet Yellen saw this coming...
Every city in the world seems to be jealous of New York’s marvelous High Line, an ancient abandoned elevated rail line that has been converted into a park. Now cities everywhere are looking at their abandoned transportation lines to see how they can be reused.
Biotechs blasted lower all week. Semiconductors hit the mat. And the once high-flying Nasdaq lost more than 3% as of yesterday—topping off its worst run since last April. Greg Guenthner looks at the latest market sell-off and questions the mainstream explanation behind it.
To allow exports of oil or to not allow exports of oil? That has become a very important question. Today Jody Chudley takes a look at that and three ways to invest around political thumb sucking…
As the business publication Quartz reports, "Cisco projects video to represent 71% of all mobile data traffic by 2019, up from about 55% last year, and representing the bulk of mobile traffic growth."