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China mortgage boycott data erased by censors as crisis spreads

bloomberg.com

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Re: China mortgage boycott data erased by censors as crisis spreads

#131

Post by strawhatguy »

autokad wrote: post #124

I first heard this story from sources that were not so friendly to China, so I didn't put a lot of credence into the sources, but now its coming from bloomberg. I hope the people ultimately get the houses they paid for. What a terrible thing it would be to put 20-40% down for a home and to never have it delivered. I would assume there is going to be some sort of bailout?

The problem’s fairly serious. As I understand it, real estate is really the only form of investment open to the Chinese people, and often, the property is bought and sold under the ‘greater fool theory’: no one actually lives in these buildings. Many don’t have working utilities. It is, (or was) an appreciating asset, handed from one to another until you can actually buy a livable place, or just make a ton of money off of, or Use it to buy foreign property, ie something more real.

So when building stopped altogether, due to government crackdown of developer loans, there aren’t any new entrants, and no greater fool to buy the worthless property, a lot of wealth might disappear in China.

It’s like US 2008, but much worse. Or perhaps US 2023… who knows?

Re: China mortgage boycott data erased by censors as crisis spreads

#132

Post by netheril96 »

dialogbox wrote: post #105
ganyu wrote: post #27

Earlier quoted context omitted.

Short (?) intro for those who don't know how it works in CN: 1. Local govts are in heavy debt and sell land to pay back their debt. 2. Real estate corps pay a hell lot of money (don't care where they get them) to purchase a land ownership (for 70 years max) from the govt. 3. Before construction even begins, the real estate corps start selling the houses to citizens. 4. Citizens pay up to 40% of the total price on the…

It does look like a Ponzi. Aren't there any regulations to prevent that? It's pretty similar to Korea until the step 3 but we have some safeguards after that. Instead of giving money directly to the development corp, we give it to a trust corp. And the dev corps can only use the money to build the building. And if the dev can not meet the due date and if it is delayed more than 3 months, the contract can be cancelled…

There are regulations but badly designed (maybe intentionally). For an analogy to the Korean case, here the dev corps and trust corps and the government entities overseeing them are more often or not in collusion together.

Re: China mortgage boycott data erased by censors as crisis spreads

#133

Post by autokad »

strawhatguy wrote: post #131
autokad wrote: post #124

I first heard this story from sources that were not so friendly to China, so I didn't put a lot of credence into the sources, but now its coming from bloomberg. I hope the people ultimately get the houses they paid for. What a terrible thing it would be to put 20-40% down for a home and to never have it delivered. I would assume there is going to be some sort of bailout?

The problem’s fairly serious. As I understand it, real estate is really the only form of investment open to the Chinese people, and often, the property is bought and sold under the ‘greater fool theory’: no one actually lives in these buildings. Many don’t have working utilities. It is, (or was) an appreciating asset, handed from one to another until you can actually buy a livable place, or just make a ton of money o…

if you are right and this is a 2008 style real estate bust in China, I wonder if there will be global contagion.

Re: China mortgage boycott data erased by censors as crisis spreads

#134

Post by TeeMassive »

holografix wrote: post #118
rr808 wrote: post #82

Earlier quoted context omitted.

I know this is supposed to be about China, but is true of Russia and many poorer countries. The elite of the country can siphon money of simple industries like oil and primary industries, but they can't control high tech. Kamil Galeev writes some great threads on this https://twitter.com/kamilkazani/status/1501360272442896388

I guess you haven’t heard about what happened to Jack Ma recently

Jack Ma was a figurehead and didn't know anything about tech (see his interview with Musk).

Musk has a very deep understanding of tech of his companies (at least for a CEO), so are most other American tech CEOs. As was pointed out, you can't siphon away tech like you can do with oil and other commodities without making things stop working.

Re: China mortgage boycott data erased by censors as crisis spreads

#135

Post by throwoutway »

ganyu wrote: post #27
CoastalCoder wrote: post #19

The linked story kind of buries the context info: > Nomura said the refusal to pay mortgages stems from the widespread practice in China of selling homes before they’re built. Funds from presales are kept in escrow accounts to use for construction. But confidence that projects will be completed has weakened as developers’ cash woes intensified. > “Inappropriate usage of presale proceeds and the lack of adequate super…

Short (?) intro for those who don't know how it works in CN: 1. Local govts are in heavy debt and sell land to pay back their debt. 2. Real estate corps pay a hell lot of money (don't care where they get them) to purchase a land ownership (for 70 years max) from the govt. 3. Before construction even begins, the real estate corps start selling the houses to citizens. 4. Citizens pay up to 40% of the total price on the…

3 4 and 5 sound basically like the US except less than 20% down (sometimes 5%)

Why are you capitalizing owing money to the bank. That’s how mortgages work pretty much everywhere

Re: China mortgage boycott data erased by censors as crisis spreads

#136

Post by Jaygles »

TheMagicHorsey wrote: post #8

I know there are enormous profits to be made in China, but I wonder if American investors ever think to themselves ... by investing in this place I am strengthening a regime that ultimately is the enemy of my values.

Merchants have no country https://founders.archives.gov/documents/Jefferson/03-07-02-0...

Re: China mortgage boycott data erased by censors as crisis spreads

#137

Post by refurb »

mysterydip wrote: post #111
unicornmama wrote: post #95

Earlier quoted context omitted.

No we don’t. You get 5 year fixed, 10 year max. Beyond is prohibitively expensive.

Just curious what your monthly payments are like compared to your income.

I think people are confused by the term (length of fixed rate) versus amortization (total time to pay off debt).

In Canada mortgages are typically 25 or 30 year amortization periods, but you can only fix the rate for 10 years (usually less as you get a much lower rate).

After the 5 years you renew your mortgage at the current interest rate with the same bank, or try and refinance entirely which requires the same paperwork as a new mortgage.

The US and I believe Netherlands are the rare countries where you can get fixed rate for the entire 30 year amortization period.

Re: China mortgage boycott data erased by censors as crisis spreads

#138

Post by [deleted] »

Erlangen wrote: post #15

The censoring is so horrible that Chinese are using other country's name to substitute China. For example, there is a question in Zhihu, "Will China become the next technological powerhouse?". The answer is talking about Russia literally, but it's about China. (Below is the answer translated by deepl). I don't want to talk about China, I want to talk about Russia. Can Russia become the next technological powerhouse?…

[deleted]

Re: China mortgage boycott data erased by censors as crisis spreads

#139

Post by dahdum »

naveen99 wrote: post #80
pessimizer wrote: post #24

Earlier quoted context omitted.

But the boycotts are rational, because even the Chinese government thinks that the developers are overextended and may fail. They seem to be taking the most careful, benign option.

boycotting a mortgage on a secured loan with 40% down is a political statement, not economically rational. The numbers are probably minuscule and the “boycott erase story” is itself mostly political.

I think the main point was that these are not secured loans. The developers operate in a ponzi like fashion, so there is nothing to foreclose on and no cash to claw back by the bank.

I’m not sure how big of a problem that really is, but I could see it toppling a number of local banks.

Re: China mortgage boycott data erased by censors as crisis spreads

#140

Post by 01100011 »

marianatom wrote: post #12

I was one of those people that thought China would never collapse due to its iron grip on economy and population. But look at recent activities * Chinese GDP shrinks to 0.4% in Q2 2022. Which is still suspicious because Shanghai economic activities declined -40%, and real estate overall activities dropped -30% * Massive mortgage boycott. Also public protests against lost deposits and unable to access bank is being ai…

China is at risk of following Japan into stagnation. It is especially likely given the massive wave of manufacturing repatriation going on now. If China loses its position as the world's manufacturer, it will have to rely on its untested military strength to obtain resources to appease its restless population. Interesting times indeed.
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