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China real estate market -- a very small dose of reality

Real estate prices in China are "beginning to fall" You can be sure that the disappointing data has been out there for a long time, but the pressure is just too great and they can no longer hide the price drops for new and old housing stock.   The reality is that housing for Chinese people has never been a source of income, it's a savings account.   Once you are retired you use your savings, and so Chinese "investors" have begun the process of using their savings to meet their daily monetary requirements.   In the OECD investment in real estate IS an investment with target returns.   In China, real estate is a non-income-generating asset.

Urbanization and a broken local government financial system made the housing market the hottest asset class in China for the past 20 years.   It is also important to note that few attractive savings instruments exist in China.  Policy actors saw the housing boom as a double economic push; it provided local governments with additional revenues, allowing them to offer services (and create jobs) and the construction industry provided jobs.   Finally, the real estate value appreciation created the impression of wealth.

That Real Estate accounts for 20% of GDP in an emerging economy facing rapid urbanization and industrialization is normal, but it's not normal for 25 years.   The one-time benefit of urbanization is done and gone, and so the real estate push long ago produced far more housing than was ever required.   

The CCP's drive is to prove full rice bolls nothing else matters, so jobs equated to income so China saw the fastest rise in income of any country in the past half-century.   All good, but it could not persist, because of the country's demographic shift.   Retirement age in China is 65 for men and 60 for women, after that, they have to retire and rely on their children or their savings to survive -- housing assets have to be sold to finance their consumption.   

As the Chinese government approves new measures to help house prices, the retired Chinese will increase the disposal of their real estate assets because they are fully aware that first China tries to stop trends it doesn't like and when that doesn't work, it forbids the action.   Most Chinese expect that within 18 to 24 months, sailing real estate will become highly regulated to slow down the supply.   

Expect prices to continue to fall.

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