China Housing Bubble
CBS news
Real estate and ghost towns in china
--numbers on amount of money invested in real estate in china
--how much local and provincial budgets come from real estate transactions
--identify key ghost towns and get anecdotal.
Ghost cities,
Questions that need to be answered:
 Size of ghost towns
 Price change in square meters
 Local revenues money from transfer fees (land sales? Gov investment in real
estate?)
 Others?
Capital Investments in Real Estate
In 2009 and January 2010, Chinese banks lent 11 trillion yuan ($1.7 trillion), much
of which has been diverted into speculation in property markets.
2010 – residential property investments accounted for 6.1% of GDP.
2010 – According to official statistics, total real estate investment reached 12% of
GDP, with 70 % of that investment going into “commercial residential” buildings.
Local governments--the real estate market (land sales, real estate investments?)
provides a substantial percentage of local revenues — 76.6 percent in 2010
compared to Beijing’s 50 percent
2011 Jan-July -- CNY3.19trn (US$499bn) was invested in the country's property
market. (33.6% year-on-year (y-o-y) increase Jan-July 2010--$374 billion) (2011
figure around 8.35 % of 2010 GDP)
Residential Real Estate Prices
The nation’s average housing prices have risen by about 125 percent from 20022010, according to official statistics.
In 2009, Housing prices grew by 13% nationally, and as high as 20.9% in Nanjing,
18.6% in Beijing, 17.1% in Hangzhou, 19.8% in Zhanjiang, 33.3% in Guangzhou, and
18.3% in Wenzhou (indicating most of the rapid growth took place in coastal cities)
According to the latest statistics, among 70 medium- to large-sized Chinese cities,
only one saw real estate prices fall on a year-on-year basis, though a few cities have
showed signs that the increase in prices is slowing.
Augut 2011— China’s August new-home prices rose in all 70 cities monitored for
the first time this year, undercutting government efforts to cool the market through
higher down-payments and mortgage rates.
 Beijing up 1.9%
 Shanghai up 2.8%
 New home prices climbed in 67 out of 70 cities
 Only 2 cities added restrictions on housing purchases from central gov call in
July
Price per square meter
In June 2011, the average house price in 100 Chinese cities was 8,856 yuan ($1,373)
per square meter.
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Beijing's No 7 Diaoyutai, branded "the most expensive home in China"
The 23 flats there cost between 180,000 yuan (HK$216,000) and 300,000
yuan per square metre. ($28,260-$47,100)
Average in Beijing - 22,900 yuan per square meter ($3,600 per square meter)
Average for the mainland - 8,820 yuan per square meter (about $1,400 per
square meter)
Second-tier/Third-tier Cities
Beginning in 2010, the real estate market tightened and local land-sale revenue
declined, in part because developers were reluctant to purchase land in a stagnant
market
The tightening policies in top tier cities has driven up speculation and prices in
lower or third-tier cities (etc. Ordos in Inner Mongolia), it is unclear if the purchase
restriction would extend to those cities to curb bubble
Less affluent cities such as Urumqi and northeastern Dandong with surging home
values as developers increased building there.
Sales Prices of Residential Buildings in 70 Medium and Large-sized Cities in
August National Bureau of Statistics of China
http://www.stats.gov.cn/was40/gjtjj_en_detail.jsp?searchword=housing&channelid
=9528&record=3
http://www.stats.gov.cn/english/statisticaldata/monthlydata/t20110919_402754
613.htm
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I. The Sales Prices of Newly Constructed Residential Buildings (excluding
affordable housing): Comparing with the previous month, among 70 medium
and large-sized cities, the sales prices of newly constructed residential
buildings declined in 16 cities while that of 30 cities remained general level.
The chain index decreased and remained the general level rose by 15 cities in
August as compared with previous month. The month-on-month growth rate
within 0.4 percent in the cities with increasing price, while that of 8 cities
dipped. In August, the year-on-year increase rate of sales prices of newly
constructed residential buildings dropped in 40 cities, increased 14 cities
over July. The year-on-year growth rates of 45 cities were within 5.0 percent.
II. Sales Prices of Second-Hand Residential Buildings: Comparing with the
previous month, the sales prices of second-hand residential buildings
decreased in 26 cities, while that of 17 cities remained general level. The
chain index decreased and remained the general level rose by 9 cities in
August as compared with previous month. The growth rates of chain index
were within 0.7 percent in the cities with increasing price, while that of 25
cities were less than 0.5 percent. Comparing with the same month last year,
the sales prices of second-hand residential buildings decreased in 5 cities.
The growth rates of 34 cities dropped, increased 6 cities over July. In August,
the growth rates of 49 cities were within 5.0 percent, year-on-year.
Ghost Towns:
Commodore Research 10/3/11
 Both cities built luxury apts that most chinese cannot afford
 Ordos (located in Inner Mongolia province)
o Kangashi district 15% inhabited.
o 60k people for single-family housing of 400k
o Construction continuing
o 2 new apt complexes being built per 1 apt complex in existence
 Zhengzhou (located in Henan province)
o Not a ghost city
o 90% central business inhabited
Local Revenues from Land Transfers
INFORMAL SALES OF RURAL HOUSING IN CHINA: PROPERTY, PRIVATIZATION AND
LOCAL PUBLIC FINANCE (中国农村―小产权‖交易—财产制度,私有化及地方财政)
RUOYING CHEN(陈若英) The University of Chicago Law School
2010 Chicago Workshop on Industrial Structure of Production July 19-23, 2010
 Total government revenue derived from the sale of urban land tenure to
individual parties in 2008 was slightly above RMB 1 trillion, more than one-third
of the total provincial expenditure of China for that year (excluding the
expenditure reimbursed by the central government), which was RMB 2.8 trillion.
 With respect to the turnover, taxes and fees collected by the Chinese
governments from the land tenure sales following the takings of rural land, one
study suggested that the local government enjoys 80% to 90% of them while the
central government keeps about 10%.
Price per square meter
http://interests.scmp.com/international-property/china/300000-yuan-a-squaremetre-thats-too-rich june 7 2011
 Beijing's No 7 Diaoyutai, branded "the most expensive home in China"
 The 23 flats there cost between 180,000 yuan (HK$216,000) and 300,000
yuan per square metre. ($28,260-$47,100)
 Average in Beijing - 22,900 yuan per square meter ($3,600)
 Average for the mainland - 8,820 yuan per square meter (about $1,400)
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http://www.financialsense.com/contributors/james-quinn/2011/10/13/chinacontinued-boom-or-bursting-bubble
 The average size of a “cheap” apartment in second-tier Chinese cities is 60
square meters (650 sq ft) and fetches an average price of $1,230 per square
meter, or $73,800.
 Mid-tier apartments in Shanghai or Beijing sell for $3,500 per square meter,
or $210,000 for an average size apartment.
 Prices are over 20 times more than annual household income, it’s not
affordable,” says Andy Xie, an independent economist in Shanghai.
 A report by the Chinese Academy of Social Science points out that in the
country’s metropolitan centers today, house prices per square meter
generally amount to between 50% and 100% of average annual incomes. “To
secure a flat of 90 square meters, an average working family in Beijing and
Shanghai will have to work for more than 50 years to pay off their loans,
compared to five to 10 years in the developed world,” according to the
report.
Housing Transfer fees as a percent of Local Revenues
http://www.reuters.com/article/2011/10/10/us-china-debtidUSTRE79901L20111010
 China Real Estate Information Corp., a Shanghai-based property information and
consulting firm, estimates 40 percent of local government revenue came from
land sales last year. Land also is often used as collateral backing the loans to
their financing vehicles.
Non-real estate related companies investing in real estate
WSJ June 27, 2011 China Risks Being Next Property-Bubble Blow Up
 Prices at auctions for residential land in eight major cities doubled in 2009
largely because of highly leveraged purchases by state-owned companies, he and
three co-authors calculate. In March 2010, state-owned companies bid up the
price of one piece of Beijing land to 10 times the asking price, according to one
analyst. One indication: Shortly after the Beijing land sale, the Chinese agency
that oversees state-owned companies ordered 78 firms—whose charters had
nothing to do with real estate—to cease buying and selling property. Nearly a
year later, in February 2011, state-owned Xinhua news agency reported that just
14 firms had left the business and another 20 were expected to get out later in
the year.
Domestic Housing bubble spreads to commercial housing
Analysis: Bubble concerns spread to China commercial property 10/12/11
http://www.reuters.com/article/2011/10/11/us-china-commercialpropertyidUSTRE79A0MJ20111011
 Property developers have increased investment into the office sector after
Chinese government measures were instituted to cool home prices.
 Commercial real estate investment in China will exceed one trillion yuan ($157
billion) this year, up from 740 billion yuan in 2010, as developers have shifted
away from the housing market, the target of nearly two years of government
measures to cool the sector down.
Real Estate Cycles - Investorz' Blog
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SOE and SME to sell secondary.
GDP on real estate, 10 years….Shanghai stock xchange.
Social protests 3-4 years. Years.
Quality of construction
Estimate on savings or expenditures on retirement, education, and medical. For
economically 300 million.
Break down by provinces