An unprecedented 364 trillion yuan bubble

 Write in the beginning: struggle for decades to open the company, it is better to hype a suite! This is the joke of this era is also sad.

Even coronavirus has failed to stop the world's largest asset bubble from expanding.

 After a brief pause in the coronavirus blockade in February, China's property market, once considered unsustainable, resumed its climb. Although the economy is still not fully recovering, investors are trading hotly.
 In March this year, a new real estate development project in Shenzhen,288 apartments sold out in less than 8 minutes. A few days later, more than 400 homes in a new property in Suzhou were snapped up by buyers. It is estimated that Shanghai's second-hand housing sales in April are close to the highest level in history. On a Saturday last month, nearly 9,000 people each paid a down payment of $1 million to qualify for a property in Shenzhen.

"In March, when the market began to rebound, I had little time for lunch." Zhao Wenhao, Lianjia's agent in Shanghai, said. Lianjia is one of the largest real estate brokers in China. He said many customers were concerned that the yuan would depreciate in the face of a global slowdown, prompting more money to enter the housing market, which is seen as a safe haven.

 Many economists say the resulting asset bubble now outstrips the U.S. housing bubble of the first decade of the century. 

At the peak of the U.S. housing boom, about $900 billion was invested in residential property every year. In the previous 12 months, China's total investment in real estate was about $1.4 trillion. Last month, real estate investment in China exceeded any month since the record.
 According to Goldman Sachs Group, China's total inventory of housing and developers reached $52 trillion (364 trillion yuan) in 2019, twice the size of the U.S. housing market, or even more than the entire U.S. bond market.
 The stagnation of the housing market caused by the epidemic did not last long. Urban house prices rose 4.9% year-on-year in June. Despite a sharp drop in sales in February, investment in the first half of the year rose by 1.9%. On Thursday, the bureau said China's overall economy grew 3.2% in the second quarter.
 Evergrande, China's largest residential builder, has raised its sales target this year by 23% from January's expectations.

While the rapid recovery in the real estate market is, to some extent, good news for the central government.

the government has also drawn attention to some of the long-running worries. The central government has repeatedly issued policies to stop house prices from getting out of control. The phrase "houses are for the living, not for speculation" became the guiding mantra of government housing policy.
 However, it is not easy for people to take this information seriously. China's home sales have experienced a decade of rapid growth driven by borrowing, with a record household leverage of 57.7% in the first quarter of this year. This is the largest quarterly increase in the ratio since the first quarter of 2010, which measures the ratio of household mortgages, consumer loans and other loans to GDP.
 At the heart of China's problem is that buyers already understand that the government seems unwilling to let the market fall. If house prices do fall sharply, this will destroy the main source of wealth for most people and may trigger unrest.
 This gives the Chinese with enough money the incentive to continue buying, because they believe that real estate in big cities will remain the safest investment in China, regardless of the overall economic situation.
 "Real estate hijacked China's economy, so the government is afraid to push home prices down, even if this is the most effective way to curb the bubble," Chen said he works for a retailer and plans to buy a property in Shenzhen.
 "You have to follow the money," he said,37. He added that he had raised the budget for real estate spending since the outbreak pushed house prices up. "As long as the government starts printing money, asset prices will rise. In China, only housing prices will continue to soar.

No one is sure how the government will solve the problem without undermining overall economic stability.

Cash-strapped developers and local governments selling land to them have also boosted sales. Both require increased revenue to pay off debt and additional policy measures have been developed to that end.
 No one is sure how the government will solve the problem without undermining overall economic stability. Policymakers have had to postpone more aggressive stimulus plans, though some economists say it is necessary, in part because of fears that they will push home prices higher.
 The results of a survey of Chinese household finance conducted by the southwest university of finance and economics in Chengdu also confirm the concern that demand for real estate is rising mostly among people who already own housing, while the demand for real estate has not changed much among those without housing.
 This is a sign of speculative investment, says Gan Li, a professor of economics at Texas A & M University and a Chinese family finance expert.
 "Speculative demand is rising because people think real estate is a safer asset than the stock market," he said. They think it's for sure. Because of the epidemic, they actually consume less and save more. so they have more money to invest. This will create a bigger housing problem ."

According to the latest data from the China Household Financial Survey, in 2017, about 21% of housing units in Chinese cities were vacant, that is, about 65 million units, which is very high compared with international standards.

 The vacancy rate was 39.4 % among households with two properties and 48.2 % among households with three or more properties.
 In big cities such as Beijing, Shanghai, Shenzhen and Chengdu, the rate of return on rent (the proportion of annual rental income to the value of the real estate) is less than 2%, which is lower than the rate of return on buying Chinese government bonds.
 Still, Ms. Bishan, a 42-year-old English teacher, said the outbreak prompted her plans to invest in a second home in Shenzhen ahead of schedule because she feared inflation. "You have to invest your money somewhere, or you'll lose value ." She said.
 Tao duo, another buyer, said she and her husband signed a contract to buy a second home in Shanghai in early May. His purchase of the home, located in the ideal school district, could increase her 3-year-old son's chances of entering a good primary school.
 "We've been watching closely for months. Normally, these homes are robbed as soon as they go public," said Tao duo,32. She decided to buy the house the next day after watching it. "We were lucky to get this. The broker's boss said that on the night we signed the contract, the company got another full offer from another client ."
 Part of the reason some economists worry is that Chinese real estate is rising so fast, and it is continuing to climb even when the economy is under pressure.

By the end of last year, about 96 percent of Chinese urban households had at least one home, well above 65 percent of U.S. housing ownership, according to a survey released by the central bank in April.

 In some ways, this prosperity has achieved Beijing's goals. It has boosted economic growth and created wealth for millions of middle-class Chinese families. Local governments must hand over a large part of the income tax to the central government, but they also receive additional income from selling land to developers.
 But the housing boom has taken investment money from other industries. It also saddled many families with debt. According to the Bank for International Settlements, China accounted for about 57% of the $11.6 trillion increase in household loans worldwide between 2009 and 2019. The United States accounts for about 19%.
 Prices in some Chinese cities have reached levels comparable to those in some of the world's most expensive cities. According to the Chinese Academy of Social Sciences, the average house price level in China reached 9.3 times per capita income in 2018, compared with 8.4 times in San Francisco.
 In Tianjin, where 15 million people live, apartments in upscale locations are priced at about 60,000 yuan per square meter, according to Real Estate Service No .1 Pacific Davis. Although London's disposable income is seven times that of tianjin, it is roughly the equivalent of what an average homebuyer pays in some expensive parts of London.

local governments are under pressure to prevent further house prices from soaring, they are more worried about a sharp drop in prices

In essence, Chinese urban residents put everything on their own houses. They now have nearly 78% of their wealth tied to residential property, up from 35% in the US.
 When the coronavirus began to spread in China, many economists and property experts worried that the peak of real estate had arrived. Housing sales fell 36% in the first two months of 2020, compared with a year ago, and many cash-strapped real estate companies were pushed to the brink. As of June 5, more than 200 small developers had filed for bankruptcy, state media reported.
 After that, larger developers and local governments launched incentives to attract buyers back. At least 26 of China's 32 provinces and regions have introduced policies to boost the property market since February, including easing down payment requirements and home purchase subsidies, according to Huatai Securities.
 "While local governments are under pressure to prevent further house prices from soaring, they are more worried about a sharp drop in prices," said Gao Fei, general manager of property company Zhongyuan Group. They can't afford the consequences of the market falling. According to the Shanghai Yiju Real Estate Research Institute, in 2019, the proportion of land transfer income and related taxes on developers to local government income reached 52.9%, a record high.

As a china mold maker, I think most Chinese will invest their wealth in real estate during the downturn. "The worse China's economy gets," he said ." The higher the prices in Shenzhen and other places ."