2014-07-23

Do Or Die Time For China's Real Estate Market

Home prices are coming down and if that trend doesn't stop soon, economic data is going to deteriorate in the second half. The September/October period looms large and it is premature to make a definitive call, but the data is still going the wrong way. If trends stay on course into the normally prime selling season and there's no improvement, there will need to be major downward revisions of Chinese GDP growth.

China real estate dominates the economy: official
About 60% of China's manufacturing and financing activities are related to the property sector, China's state media quoted a senior government economist as saying Monday.

China property chart du jour (yes, another one)
[Soc Gen] In summary, we think that real estate investment growth will continue to trend lower, likely to the level of 5% yoy (from 12.5% in June), a level last seen during the 2009 downturn. The IMF once estimated that a 1% decline in China’s real estate investment would shave about 0.1% off China’s real GDP within the first year. And so a 7.5ppt deceleration in real estate investment growth would drag down GDP growth by about 0.75ppt.
That is more optimistic than the Shenyin Wanguo analyst who predicted GDP would slip to 6.6% growth if real estate investment fell below 14% in 2014. A 0.75% deceleration in GDP growth stemming from a 7.5% drop in real estate investment is on the optimistic.

聂梅生:楼市最低迷时期已过 (Nie Meisheng: The real estate bottom has passed) Nie Meisheng is the founder of the China Real Estate Chamber of Commerce. She sees prices stabilizing here. If she's right, that is good news for China's real estate sector and the economy. There's some evidence for that in still solid sales figures in some areas, and the national figure did begin ticking up in June (third chart below).

Now for some data from the NBS: June real estate investment figures. These are cumulative, yoy growth rates.

Real Estate Investment Growth Rate

Land purchases by developer (area)

New Home Sales By Area (yellow) and Yuan (blue)

Developer Capital



Table  2014 Year 1-6 month national real estate development and sales

Index
The absolute amount
Growth ( )
Real Estate Investment (100M)
42019
14.1
 Of which: Residential
28689
13.7
    Office
2394
19.0
    Commercial space business
6172
23.2
Housing construction area (10,000 square meters)
611406
11.3
 Of which: Residential
437195
8.3
    Office
24739
23.3
    Commercial space business
77445
18.5
New housing construction area (10,000 square meters)
80126
-16.4
 Of which: Residential
56674
-19.8
    Office
3098
3.2
    Commercial space business
10732
-8.9
Land acquisition area (10,000 square meters)
14807
-5.8
Land transaction price ($ billion)
4031
9.0
Housing area (10,000 square meters)
38215
8.1
 Of which: Residential
29168
6.3
    Office
980
14.0
    Commercial space business
4353
7.2
Real estate sales area (10,000 square meters)
48365
-6.0
 Of which: Residential
42487
-7.8
    Office
1090
-2.8
    Commercial space business
3300
7.7
Commercial sales ($ billion)
31133
-6.7
 Of which: Residential
25632
-9.2
    Office
1331
-12.1
    Commercial space business
3373
9.8
Housing for sale (10 000 sq.m)
54428
24.5
 Of which: Residential
35917
25.0
    Office
2135
20.6
    Commercial space business
10355
23.4
Real estate development enterprise funds available ($ billion)
58913
3.0
 Of which: domestic loans
11293
14.1
    Use of foreign capital
186
-20.6
    Self-financing
23810
10.1
    Other funds
23624
-7.2
     Of which: deposit and advance payment
14252
-9.3
        Individual mortgage loans
6512
-3.7

 
Table  2014 Jan-Jun East-Central-West RE Development Investment

Land  area
Investment 
(100 million)
 
An increase 
)
 
Residential
Residential
Total national
42019
28689
14.1
13.7
  Eastern Region
24223
16382
14.6
14.1
  Central Region
8558
6070
11.9
13.7
  Western Region
9237
6237
14.8
12.8

Table  2014 Jan-Jun East-Central West RE Sales

Area
Real estate sales
Commercial RE sales
Absolute 
(10,000 square meters)
An increase 
)
Absolute 
(100 million)
An increase 
)
Total national
48365
-6.0
31133
-6.7
  Eastern Region
22630
-13.3
18051
-14.0
  Central Region
12987
1.8
6511
5.7
  Western Region
12747
1.4
6571
5.5



Chinese Homebuyers Are Returning Their Homes

In China, home buyers sometimes demand the right to return a home when a developer has violated the terms of a contract. Many home buyers also demand this if there's nothing wrong, but simply want out of an investment that it plummeting in value.

In Yulin city in Shaanxi province, 10 developers are now facing buyers who want to return their homes. The slowdown in the coal industry has hurt the local economy and many home buyers face tighter financial conditions. Developers are already in trouble due to the weak economy and a wave of buyers demanding their money back is more bad news.

In one case, 300 buyers claim a developer used illegal sales tactics. The developer required a ¥200,000 down payment, but later required a ¥300,000 transfer payment. Buyers felt they had to make the second payment to protect their non-refundable deposit. The developer claims that a third party investor selling the properties asked for that payment, not itself.

In another case, hundreds of buyers have returned homes due to the developer's failure to deliver on time. The developer is now extremely short on cash. Another has buyers demanding a return of their money because the developer sold them apartments with one bedroom, one kitchen, one bathroom and one living room, but left off the living room when it was built.

The government is helping buyers get their money back, but it also tells them to be on guard for fraud.

Opinion is mixed on the issue. One middle aged man said he can understand why people want to get their money back now that the value of homes is tumbling. A retired teacher said people need to bear the cost of decisions, whether the result is positive or negative. A construction firm owner said when prices were rising, everyone was taking out loans and buying, now that prices are falling, integrity goes out the window and people are looking for any way out. A senior media person said if morality is abandoned when home prices fall, the housing crisis will be followed by an even larger financial crisis.

Elsewhere, developers in Hohhot are under pressure too, cutting prices in the range of 10% to 15%. One engineering firm said many developers are paying their bills one to two months late, and in one case 2 years late. Debts can only be paid by taking possession of the property or seizing the owners luxury cars, similar to how debts are being settled in Ordos.

This may be the most extreme case of a buyer "returning their home." Some Beijing residents who won the affordable housing lottery (which had odds of 4000 to 1) have given up their right to buy. Affordable housing sells for 20% to 30% below surrounding properties, but thanks to falling prices, buyers are willing to forego this opportunity.

榆林房价急跌大批业主要开发商退房 围堵售楼处 (某城房价下跌20家开发商遇退房潮 售楼处被围)

Negative Social Mood and Plague

Another feature of negative social mood are a greater number of disease outbreaks. Aside from slowly growing problems such as drug resistant bacteria and STDs, there's been a number of outbreaks recently. The most well known is the ongoing Ebola outbreak in Africa.

30,000 people quarantined in China after resident dies of pneumonic plague. The city was quarantined for 9 days.

3 more diagnosed with rare plague in Colorado. These four cases are tied to an infected dog.

Locally transmitted chikungunya virus detected in U.S.
The first two locally acquired cases of a painful mosquito-borne viral illness, chikungunya, have been reported in Florida, health officials confirmed on Thursday.

.......Symptoms surface within three to seven days after a bite from an infected mosquito and typically dissipate within a week. There is no vaccine and the virus is not deadly.

“It is not known what course chikungunya will take now in the United States,” the CDC said.
The virus is deadly. There are few fatalities when the infection rate is low, but if there's an epidemic here will be a significant number of deaths.

WHO: Middle East Respiratory Syndrome could be airborne
"These data show evidence for the presence of the airborne MERS in the same barn that was owned by the patient and sheltered the infected camels," the study authors said in a statement. However, doctors are still looking into the difference between dead and live virus particles and are unsure whether MERS can be transmitted through aerosols.

Socionomics In One Chart

When you're in a melancholy mood, you listen to melancholy music. In a happy mood, you seek out happy music. As social mood declines, people seek out dark entertainment over light. A variety of shows, going back to the Sopranos at the start of the 2000s, feature either dark content or a villain as hero. More recently, Dexter, Breaking Bad and Hannibal. The mood in shows is also darker, such as True Detective which had the same mood as Hannibal, even though the cops were the main characters instead of the serial killer.

Television Ventures to the Dark Side
A falling transition occurs just after an extreme in positive social mood. The sweet spot for this kind of creativity seems to come after the initial setback of the new bear market bottoms and during the first major stock market rally that follows (wave B in the Elliott wave model). The decline creates a newly introspective frame of mind, and the advance provides the mental energy to put that introspection to work.

This year’s top shows have similarities to popular rock music in 1967-1968. Then, a falling transition produced artistic music, with similarly complex influences and innovative arrangements. Bright “psychedelic” lights accompanied moody lyrics. Bands epitomizing the style included The Beatles, Big Brother, Blood Sweat and Tears, Chicago Transit Authority, Cold Blood, Cream, The Grateful Dead, Jefferson Airplane, The Jimi Hendrix Experience, Quicksilver Messenger Service and Santana.

This time around, the same type of mood transition is leading to similarly layered TV drama. Today’s heroes are actually antiheroes: conflicted, complex and compromising, yet viewers cheer for them. Women, as predicted in Robert Prechter’s 1985 report Popular Culture and the Stock Market (1985), are taking on strong, central roles of leadership. Villains are becoming sympathetic, to a degree. And moral ambiguity abounds.

When if comes to politics, people seek division rather than unity. The result is this striking chart of how much spouses are angry at their wife or husband due to their allegiance to another political party.


This has generated a lot of explanations, a lot of which you can guess are mainly partisan even if thinly veiled by academic rhetoric. The reality is more simple—negative social mood. There's a clean spike right around 2008, the explanation is too obvious to miss.

2014-07-22

Wuliangye Cuts Prices as Baijiu Bubble Keeps Deflating

China's anti-corruption campaign put the hurt on luxury baijiu brands. Wuliangye is still cutting prices in an attempt to grab market share——prices at the high end are coming down 30% and wholesale prices are back to levels seen 3 years ago.

五粮液多款产品降价抢市场
Cape V. prices fall, it seems only Wuliangye (000858.SZ) a start price behavior. Recently, Wuliangye to large distributors Silver Base Group (00886.HK) "relaxation", lowered 45 degrees and 68 degrees Wuliangye liquor supply price.

"First Financial Daily" correspondent was informed that this is the recent series of Wuliangye liquor "relaxation" of a signal. A series of anonymity, told reporters yesterday wine distributors, wine blessing recently to celebrate another series of doors also reduce the supply price, "high-end product prices lowered by 30%."

Chengdu Shangshan Brand Management Consulting Co., iron plows, chief strategic adviser, said the price adjustment and price adjustment before the S & P five is the same strain: "With the S & P five series of wine price adjustment is the trend, including the underwriting of products will be adjusted before the estimated not For a silver-based behavior. "For the price adjustment, the reporter yesterday asked Wuliangye relevant person in charge, but the other side has not yet responded to the deadline.

Wholesale price night back 3 years ago

Recently, Silver Base Group announced that, Yibin Wuliangye liquor sales company, and a wholly-owned subsidiary of Silver Base Trading and Development (Shenzhen) entered into a supplemental agreement, the company of 45 degrees and 68 degrees Wuliangye liquor supply price will be reduced to September 2011 price before the company believes will have a positive impact on margin improvement. It is understood that the current market price of 45 degrees Wuliangye between 500 to 600 yuan, 68 degrees Wuliangye prices below $ 700.

Although Silver Base Group did not disclose the specific amplitude adjusted, but industry insiders believe the move will help Silver Base Group reduced losses. Wine marketing experts 晋育峰 "First Financial Daily" reporters, said:. "Currently silver-based provision 999 million yuan for two consecutive years, the existing inventory 796 million yuan, is expected next year to reduce costs after a relatively favorable" Although This news release late, but still Silver Base Group will help reduce inventory costs and reduce losses. As Wuliangye big business, has been doing high-end liquor Silver Base Group caught under the limit "Three consumption" loss, the huge loss of HK $ 1.134 billion in 2013, 2014 continues to incur losses, losses amounted to HK $ 788 million.

In fact, in addition to these two exclusive agent by the silver-based Wuliangye products, the reporter learned from other sources, Wuliangye series of wine products also recently adjusted prices. "In recent days it lowered the supply prices," the dealer said above blessing celebrate the door, "high-end product supply price reduced by 30%, we are satisfied with the price." Previously, crystal bottle 52 degrees Wuliangye The price cut is 16.46%.

There are brokers who declined to be named to the "First Financial Daily" correspondent said that this is mainly because the main brand Wuliangye price from 729 yuan five P dropped to 609 yuan, the wine itself is a reference to the original series of the price system, therefore had to be adjusted. If the series of wine prices significantly higher than the S & P five, their performance will be poor, this adjustment should be to drop the price of the S & P after five, "the end of the upside is the ultimate goal."

Control the amount insured has changed abandoned trick

In fact, as early as last Friday on Wuliangye "spoilers" a series of wine will take action. Wuliangye aspects of the exchange after the shareholders' meeting with investors when it admits: "Competition has a new series of wine changes, the high-end wine prices down, the price squeeze on family liquor Wuliangye series of wine are also under pressure, with the real estate wine to be. indisputable share. "Thus," in the second half to strengthen the focus of the market breakthrough series of wine, resources have been arranged. strive series of wine there are no major decline. "

Wuliangye case revealed the flagship product of the same date, "the company to take measures to restore market order to get good prices have stabilized and rebounded terminal performance in the off-season is within the expected range."

Notably, when specifically mentioned in the second half to begin to grab market. Wuliangye side said: "This year, stocks are kept relatively low state marketing system do not give businesses yahuo hope businesses have annual sales of around 10% to 20% of the inventory.." Wuliangye Group chairman Tang Bridge admits: "The problem is not the price enterprises have the final say again, this will be reflected in the current round of adjustment. "

"Maotai, Wuliangye to ensure that the price of 2,000 yuan, the market shrinking, slowly we'll probably forget this brand, then what is the value of the brand? So, to expand your market share, the price is determined by the market." Don Bridge said.