Afraid to invest in the stock market, the Chinese people have invested their life savings in the housing market. The housing market holds aprox 62% of the life savings of the Chinese people. Property development has been a huge factor in China’s economic growth. It accounts for 28% of GDP. Its all about to change.
New property sales in China dropped by 36% in September on average, as much as 45% in Shanghai.
Evergrande has until Oct 23rd to make its bond payments or they will default. These payments are to the bond holders who have invested in buying Evergrande bonds. The USA is holding $300 billion of these bonds which could spell trouble here.
If they default, Evergrande will have to liquidate properties at rock bottom prices.(90 million vacant apartments) This will destroy housing prices and crush the housing market along with the Chinese peoples life savings.
It seems Evergrande had to much money invested in assets that were not selling. Their net income fell, investors got scared and stopped investing and short sellers swooped in when they saw the fall of Evergrande coming a few months ago.
Without any liquidity from Evergrande, other heavily leveraged developers will also soon fall. We are talking about a $62 trillion housing sector that the Chinese people have a large chunk of their life savings invested in.
Remember the video where we saw China imploding high rise apartment building that were half built. No money to finish them and they stand to destroy the housing values if they go on the market at dirt cheap prices.
Evergrande has literally built a house of cards using the Chinese peoples life savings and money from bond purchasers here in the USA. I keep reading the bond market here may implode. If you have money in bonds, maybe talk to your broker
This could start an uprising in China, an overthrow of the current political class. I guess Xi could bail out Evergrande if he wanted to but throwing good money after bad is not the best idea. Bursting the bubble now is better than kicking the can down the road and the damage would be greater.
I don't know what the political implications for Xi or the CCP would be if the people started to revolt after learning they invested in a giant Ponzi scheme. What Xi has going for him is a few years ago he instituted new regulations that would prevent a future Evergrande scenario but at the same time these new regulations started the collapse going on now. It almost seems that Xi did this intentionally and my question is "Did he do it at President Trump's request"? Lots of different scenarios intersecting at the same time. This could get interesting.
Here is a good video explaining what is about to happen.
I don't believe you own property in china, you rent it from the government
I feel like property taxes in the US make it feels like you don't really own the land.
You own it, you can accrue wealth if it appreciates and then sell it to make a profit. You just have to pay a fee while its in your possession. If you stop paying the taxes they will seize it from you, sell it at auction, take their cut and give you the balance.
See the "if you don't pay the fee they can seize it from you" doesn't feel like true ownership. When you pay a fee to keep "owning" something it feels more like renting than owning.
It feels like renting because it is renting - this is a big part of the reason why you can't live "off the grid" as some wish to do.
The truth isn't always very pleasant, but it's still the truth.
I get that, but it should feel like true ownership. Assets cost money. Citizenship has a price.
Houses have to be maintained.
Piles of cash have to be defended.
Health deteriorates.
You can’t have your cake and eat it too.
The road to your land has to be repaved.
A car that doesn’t take gas (and doesn’t need a charge) is too good to be true.
If you’re not the one paying taxes, then you’re not the one owns the land.
Renters don’t pay taxes.
Historically renters couldn’t vote.
You had to own land.
Because only the people who own the land pay the taxes.
Only the people who pay the taxes are citizens.
Unfortunately that’s changed. Now we have dumb, unemployed, homeless felons voting on our laws. Despite the fact that its not their money they’re spending.
imagine for a minute that we lived in United States the way it was imagined with governments that are truly answerable to the people and a Fed whose real concern is to keep America safe.
If you owned property in that wonderland, would it not be fair to contribute to the mutual defense and maintenance of it?
Paying a non-negotiable charge on pain of losing the asset is not ownership. Owning something means you own it and what you do with it is not interfered with unreasonably. If you accept property taxes in principles you will get "property" taxes in practice, see recurring gun tax they want to do. They're one and the same thing.
In the land of No Bullshit, though, the entity that force you to surrender thousands of dollars every year under threat of losing "your" property, and then seize it by force and physically evict you into the street if you don't pay, is the de facto owner.
Source: own my home free and clear; do not own my home at all
Even if you do pay they and have seized land from owners with the "eminent domain" stuff though.
Fee? It's a rental fee. Youbare allowed by the queen to a warranty of title not rhe actual title.
rent to own, but you never are able to stop paying the rent portion (property tax).
What I read somewhere as far as how these companies make money is they take investor funding (including mom and pop investors) and then they build the cheapest skyscraper that is never actually used (remember those ghost cities in China?) then they use the remaining funds to buy up property in US, Aus, Canada etc. Then they show these assets to the banks and raise loans and repeat the cycle.
So essentially they value to the Chinese real estate market = Zero. And their contribution to the international real estate market is to drive prices beyond the reach of the locals.
About six months ago, a deal for a Chinese real estate development (and 'financial services ') firm to buy out Genworth's long term care insurance unit fell through. They had been trying to make this work for four years.
How Genworth got to where they are is a long back story, but they hold the largest block of LTCI business in the US. The initial selling point was that the Chinese were looking for ways to address their own baby boom generation aging. The US has 70M baby boomers, but China has 250M and they had one child rule. So they do have a problem to address. But I am thinking a bullet was dodged there. The industry has its problems for sure, but I would rather we take care of those ourselves.
But what is interesting about Oceanwide is the other projects in the US they have been involved with and have fallen apart. They were building what was to be the second largest skyscraper in SF next to the Salesforce building. When they announced they were getting out of the deal, I probably would have not noticed, but because I was familiar with the Genworth deal, it peaked my interest.
Some background on Oceanwide
https://www.mingtiandi.com/real-estate/outbound-investment/oceanwide-finds-new-buyer-for-1-2b-san-francisco-project/
Very insightful comment, thanks for this.
LTCI definitely better to keep it out of the hands of Chinese because my wild guess would be they would start leveraging those insurance contracts and as with all their scams they would suck it dry and when the time comes there wont be any money for the people who need that insurance. This is my wild guess just based on how they do everything.
Oceanwide is pretty interesting. The article says they had to sell those towers to beet bond payments. Seriously, a large Chinese company selling assets to meet bond payment should be a much bigger deal. This was almost 18 months ago. These are the first signs that an industry is in trouble and can no longer be bailed out. Experts should have been raising alarm bells about this industry all this time, not just when its imminent that Evergrande is going to default.
But this also kinda gives me hope that there is no escaping from this bubble its a long time in making and popping.
This would likely be a good idea to restrict, but it would require (A) every business that owns property to show who owns it, and who owns the corporations that own it, etc, to demonstrate their ownership is X% domestic and not foreign. (B) This would need to be documented for every real estate purchase. (C) Controls would need to be in place to prevent domestic businesses buying property, then selling the business to foreigners.
This would be a huge wrench into the gears of publicly traded corporations, which is probably a good idea, because the entire stock market is an illusion of diffused ownership so that Blackrock and Vanguard can own the entire economy, and control the behavior of most corporations, without this being overly obvious until now:
Tim Gielen: Monopoly - Who owns the world?
https://rumble.com/vn7lf5-monopoly-who-owns-the-world-must-see.html
Still trying to figure out Blackrock. They are clearly not black hats anymore.
In China you can own the home but you lease the land from the government. Basically the same thing here. Property taxes you pay means you are renting the land from the government. Stop paying your taxes and see how quick they take it from you.
In the US don't you totally own the land you buy?
EDIT: Just read your reply to Semper. Thanks.
No you don't own the land, the government can take it at any time, i believe it is called imminent domain.
Eminent Domain.
The regular Chinese don't, but the oligarchs do. This is how [they] have protected themselves from defeat, in muchthe same way as the USSR did. The oligarchs were the true owners of USSR property. Had it fell apart properly, even they wouldve been made paupers at the end, but that didn't happen, did it? And it won't happen that way for the CCP, either.
Yes "buying property" in China is signing a 70 year lease from the government