Evergrande shares plunge as much as 87% as trading resumes after 17 months • Hacker News Board

Re: Evergrande shares plunge as much as 87% as trading resumes after 17 months

#151

Post by nradov » Mon, Aug 28, 2023, 12:44 PM UTC

TheOtherHobbes wrote: post #123

ww520 wrote: post #104

Earlier quoted context omitted.

The problem started long time ago when the central government took most of the tax revenue from the local provincial and city governments leaving them without funding to operate. As a compensation, they were granted the authority to sell the land use right of their lands. Land is never privately owned in China. What is sold is the right to use the land for a period of time. Since the state owned all the lands and the…

The end game is a political crisis. Chinese peopple tolerated the semi-dictatorship of the CCP while the economy appeared to be booming. If the economy collapses there's going to be a very unpleasant - likely violent - crisis of legitimacy. It's one reason China is pushing a BRICs currency. If China can print its way out of this disaster there's some hope of mitigation - messy, but not fatal. If that doesn't happen t…

China is not pushing a new BRICS currency. They want the BRICS and others to use their existing currency, the yuan, for international trade. Of course this is never going to happen beyond token amounts, especially not in India.

Re: Evergrande shares plunge as much as 87% as trading resumes after 17 months

#152

Post by nradov » Mon, Aug 28, 2023, 12:47 PM UTC

re-thc wrote: post #72

dilippkumar wrote: post #61

As a lay person, it has been extremely difficult to figure out what is going on. I have a weak grasp on four points(with low confidence on any of them being completely accurate): 1. There is an excess supply of apartments including the ones that have already been sold. The demand side is mostly people buying second and third units as investments. 2. China is going through a weird demographic situation. The younger ge…

> 2. China is going through a weird demographic situation. The younger generations are significantly fewer in number, they will need fewer apartments to live in. That's not really the issue. I doubt the younger generation can afford it. The problem is where the wealth is going - as in those with the $$$. > The demand side is mostly people buying second and third units as investments. No, at least not always. At some…

Due to capital controls, most regular Chinese who lack CCP connections can't legally keep their savings "elsewhere". Speculative investments in residential real estate have been the only game in town.

Re: Evergrande shares plunge as much as 87% as trading resumes after 17 months

#153

Post by delfinom » Mon, Aug 28, 2023, 12:51 PM UTC

dvh wrote: post #49

Can someone explain to me why is this problem? The houses that they've built are still standing, people can still live in them, what's the problem?

Imagine solving the affordable housing problem, but by doing so you create a nation scale ponzi scheme with trillions of dollars on the line because it also simultaneously made up the majority of your country's economic activity for 2 decades. That's what China is in the pickle with.

It's great they have all this housing, except there's both nobody to live in them (they were investment homes) and there's all this debt tied up in even completing the ones that were ponzied out.

They basically took the US 2008 Mortgage fiancnial crisis and said, WE CAN MAKE IT BIGGER, BY A LOT.

Re: Evergrande shares plunge as much as 87% as trading resumes after 17 months

#154

Post by soared » Mon, Aug 28, 2023, 1:18 PM UTC

aden1ne wrote: post #98

simonh wrote: post #54

Earlier quoted context omitted.

Evergrande sells apartments before they are built to fund construction, and the purchasers pay mortgages during the build. If the company has insufficient funds to complete ongoing construction, which gets delayed, purchasers stop paying their mortgages and the company goes into a death spiral. Meanwhile purchasers get shafted, buildings stand uncompleted, and construction workers and materials suppliers see demand c…

Note this isn't merely a Chinese thing. A variation of this is in fact the default way new units get build and sold in the Netherlands, for example. Personal anecdote. I had a mortgage for 2 full years before being able to move in to my apartment because I bought it before a single stone was laid. The way this works here is that the money is held into an escrow account for most of time, with the construction company…

What’s the purpose of doing one of these? I’m not seeing the benefit on your side of paying for 2 years of mortgage but not living in the property.

Re: Evergrande shares plunge as much as 87% as trading resumes after 17 months

#155

Post by red-iron-pine » Mon, Aug 28, 2023, 1:41 PM UTC

dilippkumar wrote: post #61

As a lay person, it has been extremely difficult to figure out what is going on. I have a weak grasp on four points(with low confidence on any of them being completely accurate): 1. There is an excess supply of apartments including the ones that have already been sold. The demand side is mostly people buying second and third units as investments. 2. China is going through a weird demographic situation. The younger ge…

> Whoever is on the other side of all those mortgages should have abandoned ship a long time ago otherwise

they did. they moved a ton of cash into BTC, houses in Vancouver, or African mining holdings, and GTFO.

Re: Evergrande shares plunge as much as 87% as trading resumes after 17 months

#156

Post by asu_thomas » Mon, Aug 28, 2023, 1:46 PM UTC

barkingcat wrote: post #81

dilippkumar wrote: post #61

As a lay person, it has been extremely difficult to figure out what is going on. I have a weak grasp on four points(with low confidence on any of them being completely accurate): 1. There is an excess supply of apartments including the ones that have already been sold. The demand side is mostly people buying second and third units as investments. 2. China is going through a weird demographic situation. The younger ge…

These questions indicate a misunderstanding of how markets inside China work. I suggest you don't look at "what makes sense" but more look at the reality of what's happening. What you are also missing is that sometimes, parties are not allowed to abandon ship. Couples who have bought homes with mortgages but are not moved in for years are not allowed to give up, they are not allowed to stop paying on threat of impris…

> the government didn't really want to arrest all the people, cause that would indicate they are not in control

Objectively, not arresting them indicates they are not in control more than arresting them would.

Re: Evergrande shares plunge as much as 87% as trading resumes after 17 months

#157

Post by red-iron-pine » Mon, Aug 28, 2023, 1:50 PM UTC

nradov wrote: post #152

re-thc wrote: post #72

Earlier quoted context omitted.

> 2. China is going through a weird demographic situation. The younger generations are significantly fewer in number, they will need fewer apartments to live in. That's not really the issue. I doubt the younger generation can afford it. The problem is where the wealth is going - as in those with the $$$. > The demand side is mostly people buying second and third units as investments. No, at least not always. At some…

Due to capital controls, most regular Chinese who lack CCP connections can't legally keep their savings "elsewhere". Speculative investments in residential real estate have been the only game in town.

you don't need CCP connections to buy BTC under the table, or to buy houses in Canada.

BTC valuations and fluctuations in price can be pegged to Xi's anti-corruption initiatives. Ditto for MBS taking over in Saudi. Lotta people were moving lots of money to other places and then GTFO.

that may not help rando middle class earner in China in 2023 -- CCP is a little tigher these days... -- but realistically they don't have the need or ability to store stuff elsewhere regardless. 5k for a retirement fund isn't getting stored in a Bermuda bank, even if they could.

Re: Evergrande shares plunge as much as 87% as trading resumes after 17 months

#158

Post by red-iron-pine » Mon, Aug 28, 2023, 1:53 PM UTC

soared wrote: post #154

aden1ne wrote: post #98

Earlier quoted context omitted.

Note this isn't merely a Chinese thing. A variation of this is in fact the default way new units get build and sold in the Netherlands, for example. Personal anecdote. I had a mortgage for 2 full years before being able to move in to my apartment because I bought it before a single stone was laid. The way this works here is that the money is held into an escrow account for most of time, with the construction company…

What’s the purpose of doing one of these? I’m not seeing the benefit on your side of paying for 2 years of mortgage but not living in the property.

guarantees you a spot of your choosing in a building of your choosing, which might be in demand in big cities -- there is only so much space in big, tight, well-established cities.

anecdotally, we were looking at houses to buy and many of the nice, well-priced ones, had multiple bids and even price increases (e.g. throw another $10k on it). not quite a full-on bidding war, but it became clear that if you want in you get in early, and pay for the privilege's.

same idea, except the place ain't built yet.

Re: Evergrande shares plunge as much as 87% as trading resumes after 17 months

#159

Post by naveen99 » Mon, Aug 28, 2023, 2:23 PM UTC

dilippkumar wrote: post #61

As a lay person, it has been extremely difficult to figure out what is going on. I have a weak grasp on four points(with low confidence on any of them being completely accurate): 1. There is an excess supply of apartments including the ones that have already been sold. The demand side is mostly people buying second and third units as investments. 2. China is going through a weird demographic situation. The younger ge…

> The younger generations are significantly fewer in number, they will need fewer apartments to live in.

Not necessarily, living space per person could increase faster.

> all funded through mortgages

All promised future work is debt by definiton. with real estate being 70% if Chinese wealth, it has to be public debt, whether in the form of mortgages or government debt.

Re: Evergrande shares plunge as much as 87% as trading resumes after 17 months

#160

Post by AmIDev » Mon, Aug 28, 2023, 2:27 PM UTC

soared wrote: post #154

aden1ne wrote: post #98

Earlier quoted context omitted.

Note this isn't merely a Chinese thing. A variation of this is in fact the default way new units get build and sold in the Netherlands, for example. Personal anecdote. I had a mortgage for 2 full years before being able to move in to my apartment because I bought it before a single stone was laid. The way this works here is that the money is held into an escrow account for most of time, with the construction company…

What’s the purpose of doing one of these? I’m not seeing the benefit on your side of paying for 2 years of mortgage but not living in the property.

You can do something similar in India as well. The benefit is that you get the flat at cheaper rate, at the risk of losing all your investment. There have been many cases of the developer going bankrupt, but nothing at the scale of evergrande.