China: A 30% Crash In The Property Market

From Shanghai Daily News (Google translation from simplified Han):

Regulation has been to attack the third round of first-tier cities real estate prices down 30%

Thunder attack the third round of real estate regulation, the rapid combination of boxing, so property prices forced counterattack, a few days could not proud of the real estate business and speculators by surprise. This time, a property "hot pot" of the "lid" was covered up.

Increase purchase cost, the purchase of, property tax, this three-pronged approach, if implemented in place, the actual interest rate has been through administrative restrictions and basically blocked the tax price of the property market investment (speculative) demand.

That property prices continue to rise, "lid" was tightly closed out. At the same time, "further implementation of local government" and "the construction of housing projects to increase security efforts", the attempt to increase the supply of low-rent housing on the market, "pot" to root of the problem.

After this shot of a combination of boxing, I believe that covers "lid" will directly effect. Property market turnover will be greatly reduced, as the CPI is likely to continue to promote further interest rate rise, real estate holding costs will continue to increase, investors who own multiple sets of housing will withstand the pressure to sell vacuum, once the panic selling a conservative estimate, prices have to appear about 30% pullback.

New "state of eight" and the property tax was intended to curb property speculation, if the effectiveness of control there, holding costs sharply, but more substantial price correction, then the past 10 years, the emergence of many hundreds of millions of Chinese cities, million "property rich" will be their colors.

It is true that the local government to increase efforts in building affordable housing projects, the author is not optimistic, because the event of a fall in property prices, local government finance will decrease the land, local government expenditure in the expanding case, expect them to spend more money for housing support, which is obviously unrealistic. Only a few strong ability to govern the city, it is anticipated to increase in 2011 the so-called efforts to protect the room is still on paper.

In the new "National Eight" and after the introduction of property taxes, house prices in 2011 is yes, then the next problem is that people are most concerned about - how much will fall?

Unfortunately, house prices will fall much, not primarily controlled by the Chinese, how much house prices will fall, the key to CPI (an important factor in the decision to raise interest rates); the CPI mainly agricultural products (16.70, -0.40, -2.34%), price determination; the prices of agricultural products mainly by the United States or U.S. agricultural futures markets and Wall Street's financial oligarchy decision. Despite the gains in agricultural products in 2011 has been crazy, but the international investment bank is still talking up the recent agricultural products, while vigorously pushing up oil prices - fertilizer and other major agricultural products are produced from petroleum.

That the future we may see the prices of agricultural products continued eruption scenario. The logic is this: abnormal weather and natural disasters (such as the present drought in north China) - International investment bank pushed up oil prices - prices of fertilizer and other agricultural materials - Chinese farm products are rigid gap - the international hot money frenzied speculation - agricultural prices continue to soar - the CPI rose to more than 10%, mortgage interest rates to 12% or more - more and more Chinese who can not afford the interest stuck with speculation - have to sell from the start of a small amount of falling house prices, but it is difficult sell - a lot of panic selling, housing prices fell.

Conclude that China's rate of falling house prices, the petroleum and agricultural price rises in the decision.

In addition, the decision to declines in property prices in China, there are two important factors:

First, China's monetary tightening efforts, a variety of information from the current point of view, not in the short term reversal of contraction. Recently, the central bank governor Zhou Xiaochuan also said that despite the deposit reserve rate has been high, but the future will still use the tools and the central voting issue to hedge liquidity. Second, the decision on whether a large-scale withdrawal of international hot money in China.

Overall, prices in China for the future, I am not optimistic. Those who still holds a lot of investment houses were in big trouble, the property market and, unlike stocks, transaction costs are very high, sell when up, or when the shot is very difficult to do. Of course, a few brave people can ton output capacity, but most will put the lid on, as has been in the "frog" in the continued heating, it had lost the strength to flee.

There are a lot of trouble holding the same land, but cash flow poor real estate agency in the next couple of years than they are likely to encounter more challenges in 2008. Dragged by the property market, the stock market is difficult to be optimistic.

The coming year, the Chinese economy and Chinese enterprises will face very serious challenges, the extent to less than 2008, the appreciation of the RMB, high resource prices, high agricultural prices, labor costs, etc., the cost of increasing rigidity in China; The high reserve ratio, high interest rates, falling house prices, stock prices fell, and so will become scarce liquidity. In this backdrop, Chinese companies are still profitable if it must have extraordinary ability.

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70 billionaires in the Peoples Republic of China

Rank Name Net Worth ($mil) Age Company
1 Wang Chuanfu 5,800 43 BYD
2 Liu Yongxing 5,500 61 East Hope Group
3 Zong Qinghou 4,800 64 Wahaha Group
4 Lu Xiangyang 4,100 47 Guangzhou Youngy Mgt & Investment Group
5 Yang Huiyan 3,900 28 Country Garden
6 Hui Wing Mau (Xu Rongmao) 3,850 59 Shimao Group
7 Ma Huateng 3,800 38 Tencent Holdings
8 Liu Zhongtian 3,790 45 China Zhongwang Holdings
9 Zhang Jindong 3,700 46 Suning Appliances
10 Wang Jianlin 3,500 55 Dalian Wanda Group
11 Chen Fashu 3,200 48 Newhuadu Industrial Group
12 Liang Wengen 3,100 52 Sany
13 Zhou Chengjian 3,000 44 Shanghai Metersbonwe Fashion & Accessories
14 Robin Li 2,900 41 Baidu Inc
15 He Xiangjian 2,800 67 Midea Group
16 Lu Zhiqiang 2,650 58 Oceanwide Group
17 Liu Yonghao 2,600 58 New Hope Group
18 Zhang Zhirong 2,500 40 Jiangsu Rongsheng Heavy Industries/Glorious Proper
19 Huang Wei 2,400 50 Xinhu Zhongbao
20 Guo Guangchang 2,350 42 Fosun International
21 Lu Guanqiu 2,320 64 Wanxiang Group
22 Zhang Xin 2,300 44 Soho China
23 William Ding Lei 2,250 38 NetEase.com
24 Zhang Guiping 2,200 58 Suning Universal
25 Chu Lam Yiu 2,150 40 Huabao International Holdings
26 Zhang Li 2,100 56 Guangzhou R & F Properties
27 Zhu Yicai 1,900 45 China Yurun Food Group
28 Chen Yihong 1,850 51 China Dongxiang Group
29 Wu Yajun 1,750 45 Longfor Group
30 Zhou Furen 1,730 58 Xiyang Group
31 Yan Cheung 1,720 52 Nine Dragons Paper
32 Zhang Zhixiang 1,700 42 Jianlong Steel
33 Chu Mang Yee (Zhu Mengyi) 1,670 50 Hopson Development
34 Cho Tak Wong 1,650 64 Fuyao Glass Industry Group
35 Shi Yuzhu 1,600 47 Giant Interactive Group, Shanghai Jiante
36 Shen Guojun 1,570 47 Yintai Investment
37 Zhu Gongshan 1,550 52 GCL Poly Energy Holdings Ltd
38 Tong Jinquan 1,520 54 Changfeng Group
39 Qi Jinxing 1,500 47 Hangzhou Binjiang Real Estate Group
40 Fang Wei 1,450 36 Fangda Carbon New Material/Fangda Group
41 Shen Wenrong 1,400 67 CITIC Pacific
41 Larry Yung 1,400 63 Jiangsu Shagang Group
41 Zhang Zhidong 1,400 37 Tencent Holdings
44 Chen Lihua 1,300 68 Fu Wah International
44 Chen Tianqiao 1,300 36 Shanda Interactive Entertainment
44 Li Shufu 1,300 46 Geely Automoe Holdings
44 Lin Li 1,300 46 Ping An Insurance Group Co of China Ltd
44 Jack Ma 1,300 45 Alibaba.com
44 Xia Zuoquan 1,300 47 BYD
44 Xian Yang 1,300 35 Hidili Industry International Development
51 Du Shuanghua 1,200 44 Rizhao Steel
51 Gao Dekang 1,200 57 Bosideng International Holdings
51 Geng Jianming 1,200 47 RiseSun Real Estate Development
51 Huang Maoru 1,200 44 Maoye International Holdings
51 Ke Xiping 1,200 50 Xiamen Hengxing Industrial Company
51 Wang Jiufang 1,200 46 Rongan Property
51 Zhang Keqiang 1,200 49 Huamei International Investment Group
58 Chen Jinshi 1,100 41 Yongjin Group
58 Chen Jinxia 1,100 47 Jiangsu Zhongnan Construction Group
58 Chen Zhuolin 1,100 47 Agile Property Holdings
58 He Jinming 1,100 57 Renrenle Commercial Group
58 He Zhusheng 1,100 62 Haicheng Houying Trading Group Co., Ltd
58 Huang Rulun 1,100 58 Century Golden Resources Group
58 Huang Wenzai 1,100 56 Star River Property Holding
58 Shi Zhengrong 1,100 46 Suntech Power Holdings
58 Wang Yusuo 1,100 45 Xinao Gas Holdings
58 Yao Juhuo 1,100 78 Meijin Group
58 Yuan Kaifei 1,100 57 New Century Shipbuilding Corporation
58 Zhang Cheng Fei 1,100 39 Nine Dragons Paper
70 Chen Ningning 1,000 56 Tibet Cheezheng Tibetan Medicine Co.,Ltd
70 Hoi Kin Hong 1,000 43 Excellence Group
70 Lei Jufang 1,000 28 Haixin Steel
70 Li Hua 1,000 54 Fujian Sanan Group/Sanan Optoelectronics
70 Li Zhaohui 1,000 60 Smart Triumph
70 Lin Xiucheng 1,000 51 Wuhan Fingu Electronic Technology
70 Meng Qingnan 1,000 47 Xinjiang Guanghui Industry
70 Sun Guangxin 1,000 57 Powerlong Real Estate Holdings
70 Ye Chenghai 1,000 66 Shenzhen Salubris Pharmaceuticals
70 Zhatng Xiangqing 1,000 40 Tianjin Rockcheck Steel Group