Developers in China slash housing prices

There are signs of trouble in the China's real-estate market, which has the potential to ripple across the Pacific Ocean and affect Vancouver housing prices.

Writing on the American Perspective from China blog, Patrick Chovanec suggests that "China's economy may be approaching a crisis".

Chovanec, a professor at Tsinghua University's School of Economics and Management in Beijing, adds that "one potential interpretation of this crisis is that China is entering the terminal stage of a bubble, and that what we are seeing are the early signs of a much broader collapse".

"For the past several months, China’s official media have been touting official data indicating that while most Chinese cities are still seeing housing prices rise, a growing number of cities are starting to see a plateau or even decline in prices—evidence, they say, that the central government’s cooling measures are finally working," he notes. "More significant, in my eyes, are reports — which began emerging in late August — that in several cities across China, prices in primary housing markets (developers selling to homeowners) have begun falling away from those in secondary markets (homeowners selling to other homeowners). The effected markets include not only 1st tier metropolises (Beijing, Shanghai, Guangzhou, and Shenzhen) , but also 2nd tier (Chongqing, Wuhan, Tianjin, Zhenghou) and 3rd tier (Ningbo, Foshan, Wuxi) ones as well."

Chovanec mentions that one report mentioned a price gap in Beijing and Shanghai of 20 percent. Developers are dropping the price of their product because they need cash.

In recent years, Vancouver's real-estate market has been fuelled in part by the influx of Chinese buyers. If our housing becomes less competitive and the rich in China are feeling squeezed, that could reduce the number of purchasers.

Couple that with a net decline in interprovincial migration—which was reported in the B.C. government's last fiscal update—and it could be a recipe for a housing correction.

BC’s population grew 1.1 per cent from January to March of 2011 compared to the first three months of 2010. That was caused by 7,049 people immigrating from other countries. However a net total of 98 people moved to other provinces, marking B.C.’s first net interprovincial outflow in eight years.

A housing correction would, of course, be welcomed by first-time buyers. But it's not nearly as appealing to construction workers, lenders, and developers.

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monty/that's me

Oct 3, 2011 at 4:33pm

A young Chinese friend tells me inflation in China is running over 30% something the Chinese government will not allow to be reported.
Further, workers are demanding better facilities and pay. Attempts are being made to inflate the costs of exports to the US. So far the US is not going along with this.

Just imagine a BUY CANADIAN, BUY AMERICAN, EAT CANADIAN, EAT AMERICAN marketplace. Imagine the jobs that would be created and restored in both nations!

Another young man who is finishing up at Kwantlen, is industrious enough that he has set up a company which imports auto parts from China. (mag wheels, etc.) When asked about a warranty on his products he said "I would not put a warranty on anything from China."
These are not white folk talking.

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Oct 3, 2011 at 9:14pm

Good now Vancouver housing prices can drop 90% so that average Canadians can afford to buy a place :)

I hope all the Developers + Speculators go bust :)

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Get Buffett to the Greeks

Oct 3, 2011 at 10:16pm

I don't trust anything made in China including their ficticious stats. Every analyst that comes back from China says the same thing... they don't know what the actual numbers are, because no one is either keeping track or divulging the information. The world's Enron.

They're fucked.

Full disclosure - I'm shorting them hard right now and making a killing.

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c. chang

Oct 4, 2011 at 12:43am

i highly doubt the slowdown of the influx of chinese immigrant and property purchasing in Vancouver...the rich chinesed are not affected by inflation or mortgage rate increases as most if not all are cash rich and eager to move their monies out of China at all cost....they are starting to invest in quality of life after initial hardships, so the waves will continue to roll...unfortunately for the local Canadians and the next generation being priced out of their own country....

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Taxpayers R Us

Oct 4, 2011 at 9:05am

Fuck China.

I hope their economy collapses completely and housing prices here return to real Canadian values.

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Jason M

Oct 4, 2011 at 9:24am

chang m, I dont know if you were in the early 80's,90s, vancouvers housing boom went throught a sharp downturn, when hong kongers, stopped their purchasing of houses to obtain canadian residence. History has a sense of repeating itself. But the effect of china is going tobe more profound then just chinese, selling houses, but ripples across our economy. Our economy is still a commod based economy. When the china bubble pops, you will see commodity prices drop to lows, candian dollar drop back below 60 cents. Look at how many industries in canada depends on china growing at 9+ percent a year. For that matter in the US. Yes housing will have a profound effect on china, because as we know from the housing crisis in the past ala japan and us. Remember also china is a diffrent political structure then here, they can do things that other countries cant but they are also more unstable. They can enact capital controls, restricting money out of the country, they can devalue the yuan, put price control on the prices of houses. If they enact capital controls like korea you could see mainland chinese squeezed for money, and they could sell houses at firesale prices. Like we know from subprime, even though they are a small part of the market, it will have huge ripple effects. If your reading this and thinking china has nothing todo with you, you are wrong. It effects every part of your life. Even if your a student with no job. A main part of ubc and uvic foundations holdings are based on china, ala strong commodity prices or china sales, or corally based on china. If its like in 08 when the fall of subprime was right in their faces and they couldnt see it, then they had to cut grants and scholarships , they should have been able to make money not lose it. The china bubble is obvious.

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Rico S

Oct 4, 2011 at 5:34pm

Chang, the same was said by the Japanese in the 1980s. The reality is debt fuelled consumption never lasts.

The Chinese economy will continue to grow, but this kind of thing is never linear. They'll have their crash and so will Vancouver.

That said, Chinese investors aren't pushing the Vancouver market around aside from a small percentage of premium priced properties. The vast majority are bought by the lemmings here.

It's not a matter of "if" but a matter of "when."

The longer it lasts, the worse the pain will be.

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