Good post. This is exactly why I like Austrian economic writers and their investigative research. Krugman and his statist groupies are still stuck on explaining why cost of corn is so high.
I was thinking about China's potential collapse for a while. In my experience in China, the people there think housing prices will levitate above actual housing demand because of government policies of loose money and politically influential developers.
Demand to own (if not to live) is very high. The primary driver is that flat ownership is a status token in China, and any respectable family owned at least one before getting married. Men basically have to buy one as a nest to attract potential mates. The secondary driver is that the wealthy Chinese people have very little freedom to invest their money and their central bank keeps printing money, so real estate has become the primary method of wealth preservation. Thirdly, easy money domestically and speculative money from abroad are approaching the market with the sentiment that housing prices can't possibly fall for long durations.
The nature of the bubble as I see it, is that it is more concentrated in cities of the secondary development band (inland major and minor cities) and in luxury type accommodations. It's sort of like how distant San Francisco suburb experience the most housing inflation, but nearly all cities have mostly empty luxury flat complexes.
I went to visit Dalian last summer and not 10% of the houses in one tower had their lights on at around 9 PM in the evening. From inquiries, all of the units were sold and earmarked before the developer finished construction.
Good post. This is exactly why I like Austrian economic writers and their investigative research. Krugman and his statist groupies are still stuck on explaining why cost of corn is so high.
ReplyDeleteI was thinking about China's potential collapse for a while. In my experience in China, the people there think housing prices will levitate above actual housing demand because of government policies of loose money and politically influential developers.
ReplyDeleteDemand to own (if not to live) is very high. The primary driver is that flat ownership is a status token in China, and any respectable family owned at least one before getting married. Men basically have to buy one as a nest to attract potential mates. The secondary driver is that the wealthy Chinese people have very little freedom to invest their money and their central bank keeps printing money, so real estate has become the primary method of wealth preservation. Thirdly, easy money domestically and speculative money from abroad are approaching the market with the sentiment that housing prices can't possibly fall for long durations.
The nature of the bubble as I see it, is that it is more concentrated in cities of the secondary development band (inland major and minor cities) and in luxury type accommodations. It's sort of like how distant San Francisco suburb experience the most housing inflation, but nearly all cities have mostly empty luxury flat complexes.
I went to visit Dalian last summer and not 10% of the houses in one tower had their lights on at around 9 PM in the evening. From inquiries, all of the units were sold and earmarked before the developer finished construction.