Friend of mine is a IB VP in Beijing and says he cannot afford a condo. Based on median income in the area, if you cannot afford a condo on $200k in Beijing something is seriously askew with the local RE. Correct?
Who cares. Earnings are at an all-time high and corporations have record levels of cash on their balance sheet. Monetary policy is extremely accomodative. Unemployment and real estate don’t matter anymore.
Man, I’m not saying the economy is going to hell. Read exactly what I said. Basically, I’m wondering if it is time to sell Beijing RE. I’ve followed it for a bit, but by no means know the market really well. I know some people on here work with RE so thought they may have a view (or a clue?).
Not that I disagree with you, but haven’t people been saying “Real estate bubble in China” for the past few years?
Palantir Wrote: ------------------------------------------------------- > Not that I disagree with you, but haven’t people > been saying “Real estate bubble in China” for the > past few years? Yes, but that would have been an ineffective investment thesis as of today. Timing is important. People were saying housing crisis in the US for a long time, but timing was everything. My thinking on Beijing RE is sell now while there is still liquidity in the market and miss some upside?
brain_wash_your_face Wrote: ------------------------------------------------------- > Man, I’m not saying the economy is going to hell. > Read exactly what I said. Basically, I’m > wondering if it is time to sell Beijing RE. I’ve > followed it for a bit, but by no means know the > market really well. I know some people on here > work with RE so thought they may have a view (or a > clue?). Jim Chanos has some well-done bits of research on China/HK property market and just how hot it’s gotten. He’s short property there in some form or another, I think. Google should turn up at least a few soundbites - I got a copy of his presentation from a conference, s’pretty good.
This is hardly something new. The RE market in China has lost touch with reality long ago. Would you pay $300K USD for a crappy condo in a city where average people make, like what, $15K a year? So yeah, from a valuation stand point, something is seriously wrong with the Chinese RE market. That being said, I wouldn’t be going short on it. People have been predicting a market collapse for ages, it hasn’t happened yet. Who knows how much longer this craziness will go on. The government will do everything within its power to maintain the social stability of the country and the last thing they want is a collapse in the RE market.
There will be some tangible economic benefits that will arise when all of that cheap housing and office space suddenly tanks in price.
former trader Wrote: ------------------------------------------------------- > Who cares. Earnings are at an all-time high and > corporations have record levels of cash on their > balance sheet. Monetary policy is extremely > accomodative. > > Unemployment and real estate don’t matter anymore. Until the social inequality causes unrest and everything comes crashing down.
If you are looking on the downside of the Chinese RE market what are the possible move? (ETF, stocks, …) What are the instruments available in Europe and US for that?
That’s a good point. It’s a hard to take a short position in Chinese real estate, since there are not many liquid instruments that US people can trade. I suppose you could short an ETF like TAO (which tracks Chinese real estate companies). However, the borrow costs will be pretty high, so you’d better be *really* sure that something is going to happen before doing something like this.
Pauluss Wrote: ------------------------------------------------------- > If you are looking on the downside of the Chinese > RE market what are the possible move? (ETF, > stocks, …) What are the instruments available in > Europe and US for that? Well, if you own RE there you could sell it.
brain_wash_your_face Wrote: ------------------------------------------------------- > Palantir Wrote: > -------------------------------------------------- > ----- > > Not that I disagree with you, but haven’t > people > > been saying “Real estate bubble in China” for > the > > past few years? > > Yes, but that would have been an ineffective > investment thesis as of today. Timing is > important. People were saying housing crisis in > the US for a long time, but timing was everything. > My thinking on Beijing RE is sell now while there > is still liquidity in the market and miss some > upside? Worked at Country Wide back in 2004, and my interviewer said “As we’ve all heard, there’s been talk about the housing bubble popping soon, so we’re really trying to diversify our business instead of just being about real estate”. Lol, yah ok.
$tarving_Banker Wrote: ------------------------------------------------------- > Would you pay $300K USD for a crappy condo in a city > where average people make, like what, $15K a year? > So yeah, from a valuation stand point, something > is seriously wrong with the Chinese RE market. Just an FYI, looking at median income when trying to value top-tier urban real estate is foolhardy.
justin88 Wrote: ------------------------------------------------------- > Just an FYI, looking at median income when trying > to value top-tier urban real estate is foolhardy. Sorry, let me clarify that. I don’t think median income has much bearing on the price of top-tier urban real estate.
justin88 Wrote: ------------------------------------------------------- > $tarving_Banker Wrote: > -------------------------------------------------- > ----- > > Would you pay $300K USD for a crappy condo in a > city > > where average people make, like what, $15K a > year? > > So yeah, from a valuation stand point, > something > > is seriously wrong with the Chinese RE market. > > Just an FYI, looking at median income when trying > to value top-tier urban real estate is foolhardy. Just an FYI, we are NOT talking about the top shelf stuff here. For $200K~300K, you are not getting the Chinese equivalent of Park Ave properties. This is just how much average properties in Beijing go for these days. Just talk to anyone in China and ask them. It’s nearly impossible for the 20~30 crowd to afford home ownership in places like Beijing, Shanghai, and Guangzhou. Buying even a modest condo will deplete your life’s saving and that of your parents, just to make a DOWNPAYMENT. I can go on-and-on about the absurdity of that market.
$tarving_Banker Wrote: ------------------------------------------------------- > Just an FYI, we are NOT talking about the top > shelf stuff here. For $200K~300K, you are not > getting the Chinese equivalent of Park Ave > properties. This is just how much average > properties in Beijing go for these days. Just talk > to anyone in China and ask them. It’s nearly > impossible for the 20~30 crowd to afford home > ownership in places like Beijing, Shanghai, and > Guangzhou. Buying even a modest condo will deplete > your life’s saving and that of your parents, just > to make a DOWNPAYMENT. Anything inside a major city is “top shelf”. The demographic you’re referring to can’t buy real estate in any other major city either.
In RE terms, CBD is considered “top shelf.” In Beijing, how far out would that extend? Second ring?