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A usual buying peak of September and October did not take
place in 2011, as expected by China's property market.
On the contrary, a tidal wave of price cuts has spread from
first tier cities like Beijing and Shanghai to the second and
third tier cities. It is commonly believed that the downturn of
China's property market has arrived, the bubble has begun
to burst. Former chairman of China Banking Regulatory
Commission (CBRC), Liu Mingkang, at recently held Caixin
summit, claimed again that 50% reduction of housing prices
would still keep China's bank from suffering losses.
Experts say that, regardless of price ups and downs,
the ultimate victims are civilians.
After months of tentative small scale price-cuts,
many real estate projects in Shanghai, Chongqing,
Hangzhou and other cities have launched
great markdown promotions.
Ex-Chairman of China Banking Regulatory Commission,
Liu Mingkang reiterated at the Caixin Summit,
opened on November 11, that even if house prices fall
by 50%, banking risk is still controllable.
Liu claimed that China's current real estate bank loans
were over 10 trillion.
Stress test results of the China Banking Regulatory
Commission showed that when housing prices fall by 40%,
the banks' provision coverage ratio would remain 110%.
In the worst case scenario that prices fall by 50%, the coverage ratio could still reach 100%.
That is, though the interest rate would be irrecoverable,
the principal amount would be no problem.
Liu's claims were unanimously questioned by the industry.
China Real Estate Chamber of Commerce president,
Nie Meisheng, said at Caixin Summit that
when experienced property developers would not sell out
houses, the banks would fail too,
even if they take back the houses.
These assets would only be written-off.
"The banks would be unable to cope with a 40% decrease
in housing prices"
Financial commentator, Ye Tan, says that the claim of
"bank risk control at a 50% price drop" is merely an illusory placebo.
Any investment drop by 50% means opening the door
to the collapse.
Liu's bold remarks shows that he does not understand
the investments.
Xie Tian (Professor, Aiken Business School,
University of South Carolina): "If housing prices fall so much he [an investor] can still make money, and the bank won't be in the red, their profit is too high,
absolutely colossal profits, that's too brazen.
If it were in the U.S., a 20% price drop in housing price could
cause a bank to go bankrupt. "
A commentary on Huashang Daily said that localized land
finance policy, bank credit institutions and real estate developers have formed an interests alliance.
They are beneficiaries by elevating the housing prices.
Rises in housing prices harms house buyers, while drops in housing prices afflicts them too.
The article comments that China's property market itself
exhibits utilitarian anti-market behavior.
Unfair factors led to high housing prices.
Civilians who became mortgage slaves are the victims of
an irrational property market.
If the risks of property prices' ups and downs are
all taken on by these civilian buyers, that would cause double unfairness.
An anonymous Chinese source said that many developers
and local authorities colluded to undertake land enclosure in order to forcibly demolish civilians houses.
Such tricks of squeezing civilians, that is,
gaining valuable things with nothing, has been very common in China.
A mainland Chinese says: "In China it's common practice
for real estate developers to bribe government officials.
Working together, they drive the housing prices up, and
make all the profit. They strip the citizens of everything.
If right now housing prices take a dive, the housing
market will collapse, but the ultimate victims would be the people.
In addition, the real estate market directly impacts
other sectors like construction, steel, cement, electricity and household appliances, etc..
Economists have estimated that about half of China's GDP
relied on the real estate industry.
Industrial Bank chief economist, Lu Zhengwei, said that
the big drop in house prices not only causes developers to suffer losses, but also harms civilians.
Those mortgage slaves do not want to see house prices
falling.
Generally, those who cannot afford housing are
the majority of the public and low income groups.
These people would face unemployment when China's
economy is hit by a large scale housing price slump.
At that time, they will still unable to afford housing.
NTD reporters Lin Li, Li Mingfei and Xiao Yu
《神韵》2011世界巡演新亮点
http://www.ShenYunPerformingArts.org/
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House Prices Plunge in Chinese Ghost Townby NTDTV29,847 views
no loss with 50% drop?? ahah are you dreaming??
trademind 3 months ago
People should only invest in energy efficient housing nowadays
mo1elftausend 3 months ago