More on the Real Estate Bubble Exported by China and the Pan-Asian RE Bubble

A few more reports about the real estate bubble that China is exporting worldwide along with their industrial production have been hitting the wire at Bloomberg. Fortunately, it looks like the bubble is running out of steam and that it will pop soon now. The consequences will be historical and catastrophic, but the sooner it pops, the less catastrophic the damage.

Here are few interesting quotes (yellow highlighting denotes bubble-lingo):
June 17 (Bloomberg) -- Hong Kong home prices are “quite frightening” as China’s growing wealth fuels increases of 2 percent a month and the government may introduce more measures to slow the property market, Chief Executive Donald Tsang said.

Buyers from mainland China of property in Hong Kong are exacerbating the territory’s shortage of land for development, leading to government efforts to curb speculation in the city’s real estate market, Tsang said in an interview in Melbourne today. Mainland China doesn’t include Hong Kong, Macau or Taiwan.

“Over the last 30 months, across this period of financial crisis, property prices continue to grow at 2 percent a month, which is quite frightening,” he said. “We will do more to slow it down. But we believe in the market though. We don’t want to do anything that would destroy the market completely.”

Tsang and other government officials have in the past year warned of an asset bubble in the Chinese city, where home prices have surged more than 70 percent since the beginning of 2009 on record low interest rates and an influx of buyers from other parts of China. Since late 2009, the government has raised minimum down payments and deposits for mortgage borrowers, increased land supply and imposed additional transaction taxes to curb real estate value.

Buyers from overseas and other Chinese cities accounted for about a third of luxury home transactions in the first quarter of this year, according to Centaline Property Agency Ltd., the city’s biggest privately held realtor. Savills Plc ranks Hong Kong as the most expensive place to buy an apartment.

There’s a critical shortage of land supply over this period,” Tsang said. “At the same time, there’s heavy demand from investors both in Hong Kong and from abroad, and particularly of mainland China.”
As the renminbi, the Chinese currency, keeps appreciating, Chinese buyers will only be getting relatively richer and this trend is beyond the control of Hong Kong’s government,” said Raymond Yeung, a Hong Kong-based economist at Australia & New Zealand Banking Group Ltd.
Here are quotes from a second report:
June 17 (Bloomberg) -- From Mumbai to Melbourne, Asia’s property boom is stalling as the world’s highest interest rates and government efforts to curb prices take hold.

In China’s biggest cities, growth slowed in April after the government stepped up property measures. In India and Australia, prices are falling after the steepest interest rate increases among major economies. In the financial hubs of Hong Kong and Singapore, price growth is moderating after increased deposit requirements and land releases. In Japan, the worst earthquake on record snuffed out signs of a recovery, while South Korean banks remain weighed by soured property loans.
Asia’s recovery from the credit crisis turned into a boom for many of the region’s property markets as surging economic growth and low interest rates threatened to create an asset bubble jeopardizing the world’s fastest economic expansion. The signs of moderation in prices may reduce the need for further tightening measures and bring Asia closer in line with Europe and the U.S., where housing markets remain weak almost three years after the collapse of Lehman Brothers Holdings Inc.
A record $2.7 trillion of loans extended over two years helped fuel China’s property prices to record levels even as authorities set price ceilings, demanded higher deposits, and limited second-home purchases. China’s fixed-asset investment excluding rural households expanded 25.8 percent in the first five months of the year, up from 25.4 percent in January- through-April.
In Singapore, where demand for private homes and mortgages has boosted earnings for companies including lender DBS Group Holdings Ltd. and real-estate developer City Developments Ltd., measures to curb property speculation have resulted in slower price gains for six consecutive quarters.

The government in January raised the down payment on second mortgages and extended the sales tax for home sales to four years from three as it added more rules to curb speculation. Sales transactions are still rising as foreigners increase purchases in the city-state, even as price gains slow.
In India, where the central bank has raised rates 10 times since March last year, Mumbai home prices have declined 20 percent from their 2010 peak. Lower sales, higher land values and increased borrowing costs are forcing developers to reduce prices, according to Jones Lang LaSalle India. Prices in the city may decline as much as 35 percent over the next two years, according to Liases Foras Real Estate Rating & Research Pvt.
After seven increases since October 2009, Australia now has the highest benchmark rate in the developed world and home prices are falling at the fastest pace since the crisis. The Reserve Bank of Australia on June 7 cited softening house prices and modest credit growth in a statement explaining its decision to keep interest rates on hold this month.

No comments: