WatchWhen people say "its part of the Chinese Culture" to buy up overpriced houses (whether its in China or Cupertino) my internal BS flag starts waving.
when you look back in the history of China, there are no cases where property were purchased to sit and not generate income. No cases when luxury real estate are bought by ordinary families and are sitting idle because nobody can afford the rent.
20years ago, chinese were struggling to keep their families fed, 50 years ago real estate were the last thing on people's mind with wars etc, even if you look back 100, 500, or 1000 years ago, I can't think of a case where chines people buy up luxury property and let them sit around.
Are there any time in history of ANY culture that ENTIRE cities are built then sat empty?
This can not end well.
buying overpriced real estate with shadow financing is as part of the Chinese culture as HELOC Neg AM NINJA Loans is part of the American culture.
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Newbury Park, CA
It's true for Chinese people with money. When there's 1.3-1.4 billion of them in the world, you'l have a few dozen million who'll pay top dollar whether it's warranted or not.
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Bellingham, WA
? it's not a cultural thing, no.
Given their screwed up semi-command economy, Chinese don't have anywhere safe to put their money other than real estate.
http://www.economist.com/node/18560729
I don't know anything about China really -- the closest I've been there is a night in Seoul 20-odd years ago -- but I do suspect China is going to continue to see simply massive inflation this decade and next, making real estate there a very safe buy.
They do have 1.35 billion people to house, and their wages are still ~1/5th the global standard for a first-world nation.
The yuan returning to where it was in the 1980s:
http://research.stlouisfed.org/fred2/series/AEXCHUS
would make the Chinese a lot wealthier internally.
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Bellingham has it right and in addition within the society there exists the idea that men buy homes before getting married. It is not like a couple gets together and then gets married and then gets a house.
Since the dowery system favors men there's this "lost girls" amount. So you do see a pent up demand to buy houses just to get a wife.
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Yes, Chinese Men buy a homes before they get married, that has always happened. [edit, thats a new phenomenon, back then they get married and the bride moves in with the family] Regardless, When the do get married, the newlyweds are supposed to move into the house and start a family. They don't sit empty like they do now.
They have nothing to put towards with their money? How about investing in real companies? How about starting new companies that actually produce things? They fact that they are putting a huge % of their GDP towards dead overpriced assets can only lead to one thing.
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burritos says
Yes there are dumb rich people in Beijing and Shanghai, just like they are dumb rich people in Fla, CA and Las Vegas. Why are the Chinese immune from that? A huge majority of the billions of peasants are dirt poor and have no way of ever hope to live in those luxury homes.
China's customers (US Europe and Japan) are all in a slump. What makes you think their salaries are going to catch up to the prices any time soon?
In the global market, as soon as the salaries raise by a significant amount, manufacturing gets moved to a lower priced region...
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San Jose, CA
The average Chinese person who has to work for a living is very aware of the complete and utter absurdity of their mega bubble back home. I truly doubt any of them would buy houses here either given a look at the market and its history.
You see most of these people that are getting pointed at for propping up the bubble here are not normal Chinese (in the cases they actually are from china).
They are either the mega rich with more money than brains, or the spoiled one child policy brats whose middle class parents blood and sweat left them a good inheritance. You know, just like the stupid American boomers and gen Xs who paid cash at the height of the bubble.
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Danaseb says
That's why, the best thing we can do for our kids, is to NOT send them to the public K-12's with those folks' kids.
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Goleta, CA
Most of my Chinese friends are engineers or scientists. They save their money.
They can talk about art, electron mobility, culture, economics.
They actually build things.
Contrast that to 90% of Americans who are admin or art educated. They are dumb, think engineers are geeks.
Chinese are going to own the US and Obama is going to see to it. Mandatory Mandarin lessons will be paid for by Obama, the Keynsian Economic Genius.
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Entitlemented says
most of my coworkers are like your friends, scientists and engineers. Live in The Fortress and the younger ones of those, and even some of the not-so-younger of them, hocked to their eyeballs for The Privilege.
The Rest of Us, "locals", who happen to be in the minority, live in more modest locations with more modest K-12 API's, not so hocked up to our eyeballs. And at least, inside of our own minds, we don't lose our faces for our kids not attending top-tier API K-12.
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Entitlemented says
your chinese engineer friends here, are Americans.
Yes they save their money, just like other hard working American Engineer friends.
Obama didn't do anything to help China becoming the power it is, it was Clinton. lets not turn this to yet another "Obama is the anti-christ Muslim terrist Kenyen communist thread."
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Serpentor says
We are a Nation of talking out of our Ass,
and even a bigger Nation of taking that Bullshit to the bank as a fact.
Like people running round putting a number and a "Percenter" after it, they have idea what that even means, let alone the actual financial quantization they fit in.
I've got nothing but respect and admiration for what China has accomplished in the last 10 years. Of course our Government loves the misinformation and views we have of China, because if the American people really stopped to think about who to blame over their predicament. It wouldn't be those lil slant eye'd Bastards on the other side of the wold, it would be those crooked Sons of Bitches in Washington.
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The GOP says
If you ever took the time to listen to us 99%, we are in total agreement with you. We are blaming the Sons of Bitches in DC AND NYC. We do not have a beef with China. The only peripheral involvement of China is that we DO blame DC and WS for moving all their operations over to China to take advantage of the dirt cheap labor (smart and understandable) but pay little to ZERO taxes here in the USA for these massive profit gains. This is all made possible by the "SOBs" in DC. This is what the 99% are pissed off about and yes we UNDERSTAND EXACTLY what is and what has been going on.
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I forget how many percents are there?
http://money.cnn.com/2011/10/26/news/economy/occupy_wall_street_backlash/index.htm?iid=Lead
It seems to me there's a shit load of people doing the talking for a large proportion of folks that didn't ask them to.
One thing for certain, 99% of people in this country aren't in the parks protesting random thoughts.
But at the same time, I don't get how the mainstream media, calls one asshole with a sign on Youtube 53% either.
We're in deep shit, and I don't see how the directionless dolts in the park are going to do anything to fix that.
One thing for certain 153% percent of the people in this country are confused.
99% in the parks
and the 54% at their desk at 2 am with a sharpie and dry erase board.
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Most of my Asian friends are engineers. They work harder than 90% of american admin and arts majors.
Most of my Asian friends can talk about electron mobility, history, culture, and economics.
Americans eat whitebread and get degrees in liberal arts.
It happened. This is reality.
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BubbaE says
We talk about it too, we just talk about the filtered distractions that are handed to us to chew on and argue about.
If you dare to have your own thoughts or opinions, that didn't come from directly form a Blog, or a Political talking head, then it's written off.
I think the major difference in Us now, and Us then.
When we used to discuss politics, we discussed how it effects us, and our own thoughts about it.
Now it's the lyrics of a favorite Pop song, if you're not lip syncing to the candidate of choice then you're singing the wrong song.
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BubbaE says
LOL! an asian co-worker (engineer) once asked why I (a non-asian) 'was so happy are work'. He also went on to say "you must not be married". He was right. Asian wives are heck of a motivator for them to work, work, work. Many of husbands say, they will die an early death because of their wives, parents, inlaws and other pressures.
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Tiger Mom, Dragon Lady, etc.
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madhaus's website
The 53 percent blog is a complete creation of a known Tea Party blogger. If you look at it, you'll notice most of the messages don't even have people in them, just a wall of text. And a number of the pictures are faked. You can find old create dates or crappy photoshop.
Obviously that "backlash" is manufactured.
As to China, the government has banned "Occupy" plus a city name on the search engines.
Oh yeah, speaking of Chinese culture and real estate, did you read the NY Times article about them tearing down a fairly new neighborhood to supposedly expand a road? Seems the people who live there weren't consulted and weren't treated all that well for objecting.
NY Times article
Burbed writeup
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madhaus says
I wonder what will this country do, when the Government tells Google and Apple cloud to not to load their customers contacts, and flip the 4G switch to silence, when they are ready to control the rabble masses in this country?
It will be so easy with the cloud and smart phones to put this nation a shadow of silence, when they are ready to do crowd control.
The other day I flipped the switch on my Android "Do not show Google contacts" not because I didn't want to see them, but because as far as I was concerned, I didn't have any.
Well Google hijacked my address book, even though I used Bluetooth to transfer them to a vcf file and imported them in, before I even enabled or created a Google account.
As a result when I ticked the "Don't show Google Contacts" I was unable to see any contact. I signed into to my Google account on my computer(Which I never planed on doing ever) and was shocked to see all of my contacts on Google profile page. I never asked it to take control of my Contacts, it just did.
It will be very easy for these guys to blackout America, so if you want to get riled up about what a Country is doing, you better ponder our countries relationship with Google. And ask your self, is it just too damn cozy?
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Baltimore, MD
Serpentor says
I was going to say something like supposedly in China owning a car and a house makes it much easier to get laid (in relative terms compared to other parts of the works). At least that's what I am lead to believe.
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"They have nothing to put towards with their money? How about investing in real companies? How about starting new companies that actually produce things?"
As the Chinese saying goes, a Chinese businessman has five sets of books: one for the government [taxes], one for his partner, one for his wife, one for his girlfriends, and one for himself.
How can one invest in an economy that is this opaque? You can at least see property. Ho do you "see" your ownership share in a company? And even if you can see your share, how do you know what it is really worth? Which set of books is the company owner showing you?
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People make up all kinds of stories about what the Chinese are doing with respect to US properties. Both the Canadian and US realtors are interested in suggested that foreigners will save their markets and raise prices. Meanwhile, there's little evidence that foreigners are buying here in larger numbers than they were before. And it's clear in places like Cupertino that, while many of the people there are immigrants, in many cases the people buying the overpriced houses have been here a long time.
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Not Sure says
More than a few would beg to differ...
http://en.wikipedia.org/wiki/Four_Asian_Tigers
The Four Asian Tigers or Asian Dragons is a term used in reference to the highly developed economies of Hong Kong, Singapore, South Korea and Taiwan. These nations and areas were notable for maintaining exceptionally high growth rates (in excess of 7 percent a year) and rapid industrialization between the early 1960s and 1990s. By the 21st century, all four have developed into advanced and high-income economies, specializing in areas of competitive advantage. For example, Hong Kong and Singapore have become world-leading international financial centres, whereas South Korea and Taiwan are world leaders in manufacturing information technology. Their economic success stories have served as role models for many developing countries, especially the Tiger Cub Economies.
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Not Sure says
Japans RE bubble ring a bell...http://en.wikipedia.org/wiki/Japanese_asset_price_bubble
No! could never happen here mentality...
As in both Japan and US, it certainly did effect both economies.
Actually if you studied the markets, Japans bubble inpacted the global economy. As did the debts defualts by Latin America in the early 80s and Russian in late 90s.http://en.wikipedia.org/wiki/Latin_American_debt_crisis
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Not Sure says
Wiki isnt bad.. they provide the first level of info.
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Not Sure says
http://en.wikipedia.org/wiki/1990s_in_Hong_Kong
Three months after the handover in July 1997, Hong Kong was dragged into the Asian Financial Crisis. At one point, the stock market fell by 22.8% within a week. Between the summer of 1997 and 1998, the leading shares in the Hang Seng Index lost nearly ⅔ of its value. The government had to intervene by buying billions of dollars worth of shares. While this may have prevented the market from collapsing and staved off pressure for the Hong Kong dollar to be depegged against the US dollar, the move was widely criticised as it undermined Hong Kong's status of a free market economy.
[edit] Real Estate
In 1998, the real estate bubble burst due to the government's housing policy, though the Asian financial crisis also had some influence. Upon the inauguration of Hong Kong SAR's first Chief Executive, Tung Chee Hwa announced the building of 85,000 flats a year, while reducing public housing wait time from 7 years to 3 years.[5] These factors combined to begin the most severe recession in Hong Kong since 1967, which was a year of ambitious government projects that used up fiscal reserves on infrastructure and structural deficit.
China: The Forgotten Real Estate Bubble Of The 1990s
http://www.alsosprachanalyst.com/real-estate/china-the-forgotten-real-estate-bubble-of-the-1990s.html
"There is very little wonder why people nowadays do not know that there was once a real estate bubble, or they have forgotten"
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Not Sure says
In another words.. "it will be a safe landing"...
Yea... I heard that one before...
The Great Property Bubble of China May Be Popping JUNE-2011
http://online.wsj.com/article/SB10001424052702304906004576367121835831168.html
BEIJING?After years of housing prices gone wild, China's property bubble is starting to deflate.
World Bank economists warned at a Beijing press briefing on Wednesday that a real-estate bubble was among the biggest economic risks China faces.
Already, in nine major cities tracked by Rosealea Yao, an analyst at market-research firm Dragonomics, real-estate prices fell 4.9% in April from a year earlier. Last year, prices in those nine cities rose 21.5%; in 2009, the increase was about 10%, as China started to recover from the global economic crisis, with much steeper increases toward the end of that year.
A downturn in property and apartment prices would harm Chinese industry and investment, and crimp consumer spending. China is a "housing-led economy," says UBS economist Jonathan Anderson, who estimates that property construction alone accounted for 13% of gross domestic product in 2010, twice the share of the 1990s.
Global Dominio Effect...
If the Chinese housing market slows faster than people had expected, the impact would be felt in a number of markets that export heavily to China. Many Latin American and African economies have shifted their focus toward Chinese demand for their raw materials, and many Western firms, including U.S. retailers and fast-food chains, now bank on Chinese consumers feeling wealthier to make up for stagnating sales elsewhere. Also, plans by local Chinese governments to improve infrastructure loom large for heavy-equipment makers like Caterpillar Inc.
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Emeryville, CA
Serpentor says
But Nixon "opened" China, the apologists say. So, what was he opening it for if not commerce?
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zzyzzx says
isn't that true anywhere? you pull up in a Lambo in a club in Miami, panties start dropping. Money attracts the Vag. What does that have to do with chinese culture and bubble real estate?
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Not Sure says
It will be disastrous to assume China's investments are not leveraged at all. The buildings are all financed though the back door by Local government that has borrowed to the hilt. The apartments and luxury condos are bought with borrowed money, many funded by local governments and channeled the private citizens and not documented in the traditional mortgage sense. The scary part is most westerners have no idea its happening just because they see that there are very little official mortgages, they assume the houses are all bought with cash.
Shadow financing.
you think all those factory workers making a few bucks a day saved up enough money to buy that luxury condo? (with food and goods prices growing by double digits) LOL
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Not Sure says
LOL. That is a pitiful example. Ok
First of all, that is a preview on what is going to happen to China. Spanish is part of the PIIGS fiasco and this is one of the result.
Second, That small ghost town is pitifully small (more like a village) compared to the massive cities (complete with massive sky scrapers, stadiums, and huge libraries and malls: built for a million citizens.
http://www.time.com/time/photogallery/0,29307,1975397,00.html
owned.
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Bellingham, WA
CL says
Serpentor is right, I think.
http://tech.mit.edu/V114/N27/china.27w.html
Plus in 1994 the yuan mysteriously weakened:
http://research.stlouisfed.org/fred2/series/AEXCHUS
funny that
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http://www.dailymail.co.uk/news/article-2005231/Chinas-ghost-towns-New-satellite-pictures-massive-skyscraper-cities-STILL-completely-empty.html
"When asked what has happened in the past six months since the ghost cities were built, he said: 'China built more of them."
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Serpentor says
Govt mandated quota... The 5 Year Plan.
http://en.wikipedia.org/wiki/Five-year_plans_of_the_People's_Republic_of_China#Eleventh_Five-Year_Guideline.2C_2006.E2.80.932010
Following are the highlights of the draft of the plan, which was distributed to the media prior to the opening of the Fourth
Session of the 11th NPC: 2011–2015
Population will be controlled below 1.39 billion
Urbanization rate will reach 51.5%
Value-added output of emerging strategic industries will account for 8% of GDP
Foreign investment is welcomed in modern agriculture, high-tech and environment protection industries
Coastal regions to turn from "world's factory" to hubs of R&D, high-end manufacturing and service sector
Nuclear power will be developed more efficiently under the precondition of ensuring safety
Construction of large-scale hydropower plants will gain momentum in southwest China
Length of high-speed railway will reach 45,000 km
Length of highway network will reach 83,000 km
A new airport will be built in Beijing
36 million new affordable apartments for low-income people
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Santa Cruz, CA
Among the Chinese people I know (not Chinese-Americans), a common thread is frugality, saving, and poor financial decisions regarding investments.
In China, one is limited in the choices for investment. The China stock market seems rigged, dishonest, risky, frothy. Think Sinoforest. So, many Chinese are reluctant to invest in their stock market. Chinese to my knowledge are not able to buy American mutual funds either.
So, Chinese often do buy empty apartments because renting them "ruins" their brand new characteristics. Strange but true, the investment of real capital is going to something that doesn't provide any income and has dubious future value.
Some folks doubt whether the Chinese can afford these massive projects. Of course the Communist government can. In China, much of the wealth resides in the government which in the USA resides in the people.
I often feel sorry for my Chinese friends, they have lost fortunes, whether on Apple stock options (how did she do that?), houses in Nevada, restaurants in San Francisco, betting on sports, buying mutual funds and selling when frightened, etc.
The funny thing is the reason given to me so often for these mistakes is "I was unlucky."
I cannot imagine how much money they would attract if Vanguard, T.Rowe Price and Fidelity opened a branches in Beijing, Shanghai and Hong Kong.
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Not Sure, you don't know jack about Asian culture or their economy. You're just talking the talking points you've been fed to make excuses for our own failing.
China is Communist like we are a Democracy.
Both grossly perversed in their own way.
We're no longer a true democracy, and China is not a true Communist country. Not in the sense where people get ration coupons for their goods and services and have to whisper about their hopes and dreams, for fear of the fascist police persecuting them as a dissident.
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clambo says
Ever go to the San Mateo race track, Bay 101, or local Casinos...
Yipes!
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Not Sure says
if they had all those people to fill up the cities, where are they now?
What do you think will happen when the government step in and take the people's most valuable possession and turn around and give it to someone else? Given their obsession over material goods and real estate, do you think that will bode well? Minimum mass riots, worst case revolution.
If they were all "bought with cash" as you say, how long did these people save to buy these luxury homes? Do you think they will just sit by while the government seizes them?
When real estates start getting seized, what do you think will happen to the price of real estate? What happens when the largest investment of an entire nation goes to zero?
are you just throwing arguments up to see what sticks? do you really believe what you are saying?
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Not Sure says
I think if you actually read Chinese history, you'd find a very prosperous country during the Tang and Song dynasties. But you're probably just here to sling mud and see what sticks as someone said.
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San Jose, CA
Think it's probably different culture values different stuff. Chinese parents, typically, will do anything to get the kids to go good schools, so they are probably also the ones much more readily to spend on houses at Cupertino or Palo Alto than American Whites. And, the majority of them (in the past) are coming from where the standard of living is probably lower than that of US and hence more tolerant to the conditions of the houses. Whether they have jacked up the price or not, maybe, not intentionally but certainly contribute to it to certain extent.
As for the real estates in China, think that's a different story, people keep buying these expensive property probably do that with the hope they are going higher, more from a speculative angle rather getting it as home.
And, I don't think this will apply to all Asians or Chinese descendants not from China. If there is a pattern in the behavior, it's most likely environmental reasons.
However, I would stress the ridiculous housing price in bay area is not solely due to *crazy* Chinese buyers.