Chinese Cities Most Likely to Suffer A Housing Market Crash

I saw this list of the top 10 cities most likely to suffer a housing market crash on a Chinese site back in April. Not finding any other information about the areas and recognizing only a couple as being previously cited for having real estate bubbles, I held off posting it. I don't know why these cities were chosen (how they came to the "most likely to crash" formulation) and as can be seen, the list is mainly made up of cities in Gansu province. To this point, there has been very little coverage of Gansu in mainstream real estate articles, perhaps due to being a relatively underdeveloped province in the west where even if a bubble exists, prices are still far below prices in wealthy regions such as Zhejiang and Jiangsu provinces. Also, Ordos is on the list and has already burst.

10. Zhangjiajie, Hunan （张家界）
9. Qingyang, Gansu （庆阳）
8. Yan'an, Shaanxi （延安）
7. Pingliang, Gansu （平凉）
6. Guyuan, Ningxia （固原）
5. Ordos, Inner Mongolia （鄂尔多斯）
4. Dingxi, Gansu （定西）
3. Jiuquan, Gansu （酒泉）
2. Wuwei, Gansu (武威）
1. Longnan, Gansu （陇南）

Source: 房价暴跌可能性最大城市

The list coincides with the recent report from Noumra on the housing bubble: China’s property bubble has burst: Economists

Nomura said four provinces in north China — Heilongjiang, Jilin, Inner Mongolia and Gansu — are leading indicators of the deepening problems in the real estate sector, with property investment having turned negative in the first quarter while industrial output slowed. In Heilongjiang and Jilin, property investment plunged by more than 25 per cent from the previous year.

AS the previous posts today showed, real estate is actually the victim of the industrial slowdown in these areas.

Some background on Wuwei:
Forever Blowing Bubbles

How exactly these below-minimum-wage earners are affording these new condos is unclear. In the construction frenzy which swept Gansu and most of western China between 2009 and 2012, local housing prices shot from 2,000 yuan (US$330) per square meter to over 5,000 yuan (US$820), meaning that a single square meter of urban housing costs the equivalent of 83 percent of the average Chinese farmer’s annual income. And despite housing being priced by the square meter, it is retailed by the unit.

According to the 2013 Annual Report on the Development of the Western Regions in China released by the Chinese Academy of Social Sciences, investment in the housing industry in China’s west grew 20.4 percent in 2012 over the previous year, while sales only grew 3.7 percent in the same period.

Housing investment in Gansu Province in particular has been continued at a breakneck pace despite no indication of a rise in demand. In 2010, housing investment in Linxia, Gansu tripled on the same period in 2009, while three other cities saw an average 70 percent rise in investment.

Until now, there was little indication that investors are losing their appetite. Gansu’s year-on-year growth rate in 2012 still stood above 50 percent according to the local statistics bureau.

However, in the first half of 2013, growth in real estate investment dropped by around 30 percent, with sales growing by only 6.5 percent on the same period in 2012. Countless pristine but deserted housing complexes are a visible testament to the overestimation of the potential locked up in Gansu’s cities.

Though housing prices in Wuwei have yet to fall dramatically, the city’s newly built apartments are now retailing at cost price according to Liu Weiqiong, a sales manager with a local developer.

I did not find much on Wuwei, but there are articles on the real estate market in Lanzhou, the capital of Gansu province, facing a slowdown.
全国楼市低迷背景下 兰州二手房市场的多方角力

In Lanzhou City Real Estate Trading Center, although not officially a positive response, but the reporter observed, compared to the previous scene can be "deserted" to describe. In late April to early May, several on-site reporter Ta Fang, trading hall in the past are no longer crowded scene.

　　毛尚宏 said, now everyone is talking about the decline in prices may occur in the future, just as the property market boom when everyone thinks you can make money with eyes closed, as expectations for future property buyers and sellers are becoming a bargaining chip.

21个城市楼盘降价促销 兰州房贷利率未松反收紧

This year in April, Lanzhou prices existing home prices dropped 98 yuan per square meter, down 1.29%. Affected by the decline in new home prices, Lanzhou existing home sales also saw sluggish performance.

　　"Recent listing prices for existing homes have been reduced by a lot of owners." Sincere interest in Lanzhou Jiazheng Ning store staff May 9 also confirmed to reporters. He told reporters about a cypress road four-room apartment listing, floor and orientation are good. "In the beginning homeowner's listing price is 800,000, but has few inquiries, so the price was cut to 790,000, then down to 780,000, now if someone wants to buy it, the 780,000 price can be negotiated, the bargaining space relatively large. "

Those unfamiliar with Gansu may remember this story from last year: In rush to urbanize, China flattens 700 mountains

Despite environmental concerns about the project's feasibility and long-term impact on this arid, polluted region, a government-hired private developer is slicing the tops off 700 low-level, barren mountains and filling in the valleys to create a 10-square-mile base for "Lanzhou New City," 8 miles from Gansu's grimy capital.

"I feel so proud of this project; China is amazing," says Ye, 40, his hands dripping with engine oil from his excavator. "This is the largest mountain-moving project ever in China. It shows China's power."

......Yan Jiehe, the multimillionaire founder of China Pacific Construction Group sounds confident about his $3.5 billion investment to carve out a city, ready in five years, "with the flavor of water city Venice, and the flavor of a Las Vegas oasis in the Gobi." he told China Newsweek, a magazine unrelated to the U.S. Newsweek.

"I am striving to win honor for Chinese people," says Yan, nicknamed "the Bulldozer."