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 managing editor of The 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

  • Pingback: Trackback

Recent Articles

3 Terrible Trades You Need to Know About Right Now

Greg Guenthner

Generally speaking, the Dow has been fairly boring as of late. A slight uptick here, a minor dip there... Nothing interesting, and certainly no sign of a major pullback. But, as Greg Guenthner explains, that's only half the story. To get a clearer picture, you need to look at the volatility in the small cap market. Read on...


The One Word Every IPO Investor Needs to Know

Jonas Elmerraji

When a big company IPOs, investors can hardly contain their excitement. In a flash of exuberance, they throw money at a company they've already decided is worth something... even if the market hasn't made up its mind yet. Today, Jonas Elmerraji explains how one simple word can change the fate of every IPO investor. Read on...


5 Min. Forecast
How to Spend $5.5 Million on a War You Already Won

Dave Gonigam

Baltimore was abuzz this weekend with parades, festivities, tall ships and air shows... And it only cost $5.5 million of taxpayer money! Yes, Saturday marked the bicentennial of a critical moment in the War of 1812 - the battle of Fort McHenry. And if you know of a better way to celebrate a war, Dave Gonigam is all ears...


The First Step to Self-Publishing Your Book

Chris Campbell

Want to self-publish a book? You can't afford to miss out on this series. Chris Campbell promises to deliver a step-by-step guide to self-publishing that leaves nothing out. Today, you'll learn how the most successful self-published book got to where it is today - and how you can use the same strategy to make your own book a success. Read on...


One Commodity Worth Buying Right Now

Greg Guenthner

While most of the commodity sector is getting beaten down right now, there's one commodity that's been on an uptrend since early 2013. And you're in luck... It's on a two-week dip in price right now, that could turn around any minute. Today, Greg Guenthner explains why this could signal a solid buying opportunity. Read on...