Chinese Property Owners Smash Showroom in Protest over Falling Prices; The Chinese Housing Bust is Underway
October 29, 2011 · Posted in Global Economics
Disgruntled over falling prices, Chinese property owners smashed a showroom:
A group of around 400 homeowners in Shanghai demonstrated publicly and damaged a showroom operated by their property developer after the company said it cut prices. Home buyers had wanted to speak with the developer to refund or cancel their contracts but were unsuccessful, according to local media. One report said the price cuts exceeded 25% per square meter.
That’s 25% overnight, mind you!
MarketWatch notes that the bubble has begun to burst:
Take a look at the Chinese situation. The bubble has been as big as any we’ve seen.
Ten years ago, homes in Shanghai sold for about six times an average family’s income. Today that’s 13 times. Shenzhen has gone from five times to 14 times. These are off-the-charts absurd ratios. This is a bona fide mania.
And it works fine until the music stops.
Where are we now?
Prices have started falling. Now, fewer than 46 of 70 major cities saw prices stall or decline in September, reports the National Statistical Bureau. As recently as January the number was just 10.
And the FT writes China property developer warns on price falls:
A 30 per cent drop in property prices would precipitate a collapse in fixed investment in China and the country’s investment-driven economy would experience a so-called hard landing after years of annual growth above 9 per cent, according to UBS economist Wang Tao.
There will be no magic cure for China’s housing, stock, and credit bubbles. Prepare for a hard landing in China and thus a hard landing in stocks and commodity prices (except gold) …