Hangzhou Butterfly Effect: Price Decline Hurricane To Sweep China

Picking up on yesterday's loss selling story (Hangzhou Developers Selling At A Loss To Repay Lenders) comes this opinion piece from Yu Fenghui (余丰慧). He sees the loss selling trend spreading and pulling prices down. This was a top headline at iFeng's real estate section today.

The highlighted portions in these Google translated (with some clean-up) snips are from the original:
Hangzhou property market has always been a great barometer of the national real estate market. March 2012, the city of Hangzhou was the first to call for the dawn of the "loss selling" slogan. February 2014, the price of real estate in Hangzhou Dickson of a project, the first shot fired Horse prices, the national real estate market has since entered the winter. Started going in 2015, Hangzhou has started a "loss selling" first shot, whether this sign will spread to other cities? I think the possibility is very large, the hurricane set off by Hangzhou butterflies might quietly blow across the whole nation.

The fundamental reason is the huge property bubble. High prices have become the people's economy, national output and income can not bear the weight. The most frightening thing is that, for a decade the high prices has basically sucked generations of Chinese family cash dry, both investment demand and user demand has been basically exhausted. Meanwhile, the market has formed expectations of price declines, very solid.

Hangzhou's large scale developers "loss selling' also released another crisis signal: government relaxed buying restriction, the central bank relaxed mortgages and even added liquidity, etc. These "aphrodisiacs" have failed. These "aphrodisiac" only in November and December last year produced some firmness in the market, the property market showed slightly upright signs, then began to weaken. Once the "aphrodisiac" fails, the market's expectation of price declines will intensify. Chinese people have a buy the rally, do not buy the dip tradition, the more home prices fall, the more they won't buy, the more they don't buy, the more home prices will fall. From Hangzhou's outgoing signal, the price down trend is likely to affect the whole country, Beijing-Shanghai-Guangzhou-Shenzhen and other cities will be hard pressed to escape.

From the capital chain, the capital chain housing prices are more and more tightly stretched, some developers have been broken. Kaisa is a typical example. China Housing prices are mostly sleight of hand tricks, the debt ratio is extremely high, almost all rely on bank loans, trust financing, high debt financing civil usury way to develop construction. Once the relevant environmental changes, housing prices in the capital chain will have a fracture risk.

From the point of view of the stock room inventory, housing prices in real estate stocks have increased significantly. Interim Regulations plus real estate registration began March 1, will lead to a large number of official classes especially concentrated in the hands of corrupt real estate market, real estate inventories remain high.

I still say: the price down trend has formed, and no one can stop it.

iFeng: 亏本卖房释放两大危险信号 房价走低或蔓延

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