Terrific: Real Estate Bubble Begins Bursting in China

For years, China was propping up what little was left of the global economy. They might not be able to perform that function anymore.

The real estate market in Hangzhou looks like it has just passed an inflection point. It is not so much that fundamentals have deteriorated—they have been weak for some time—as that people’s mentality has changed.

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Now, the problem of no buyers is spreading across the country. Sara Hsu notes China’s residential markets are becoming inelastic. “Once consumers stop buying,” she writes, “deep discounts are ineffective in drawing them back.” People aren’t buying because they believe prices will decline further.

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China is at the point where problems are feeding on themselves. Pessimism about property, which accounts for about 15% of China’s gross domestic product, is beginning to affect the broader economy. Declining property values look scary, despite cheery statements from government officials who assure us the property bubble is “not big” or analysts who say that the problems are not “systemic.” But the Chinese don’t look like they are buying either of those views. “If this continues, it will have immense impact on the whole Chinese economy,” says an unidentified Hangzhou real estate salesman on Economic 30 Minutes. “Without question, everyone thinks there is a bubble.”

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There is little any leader can do. Collapses occur when people lose confidence. That is now happening in China.

(Game of Thrones thread below, for those who care.)

posted by Ace at 03:04 PM

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