Housing market's gonna crash

So the U.S. and Europe aren't the only ones seeing a housing market slow down.

https://slashdot.org/story/22/08/17/1536244/as-chinas-economy-stumbles-homeowners-boycott-mortgage-payments

For decades, buying property was considered a safe investment in China. Now, instead of building a foundation of wealth for the country's middle class, real estate has become a source of discontent and anger.

From a report:
In more than 100 cities across China, hundreds of thousands of Chinese homeowners are banding together and refusing to repay loans on unfinished properties, one of the most widespread acts of public defiance in a country where even minor protests are quelled. The boycotts are part of the fallout from a worsening Chinese economy, slowed by Covid lockdowns, travel restrictions and wavering confidence in the government. The country's economy is on a path for its slowest growth in decades. Its factories are selling less to the world, and its consumers are spending less at home. On Monday, the government said youth unemployment had reached a record high.

Compounding these financial setbacks are the troubles of a particularly vulnerable sector: real estate. "Life is extremely difficult, and we can no longer afford the monthly mortgage," homeowners in China's central Hunan Province wrote in a letter to local officials in July. "We have to take risks out of desperation and follow the path of a mortgage strike." The mortgage rebellions have roiled a property market facing the fallout from a decades-long housing bubble. It has also created unwanted complication for President Xi Jinping, who is expected to coast to a third term as party leader later this year on a message of social stability and continued prosperity in China.

So far, the government has scrambled to limit the attention garnered by the boycotts. After an initial flurry of mortgage strike notices went viral on social media, the government's internet censors kicked into action. But the influence of the strikes has already begun to spread. The number of properties where collectives of homeowners have started or threatened to boycott has reached 326 nationwide, according to a crowdsourced list titled "WeNeedHome" on GitHub, an online repository. ANZ Research estimates that the boycotts could affect about $222 billion of home loans sitting on bank balance sheets, or roughly 4 percent of outstanding mortgages.

Emlyn wrote: »

I recall seeing stories from China a few years ago about city sized building developments consisting of hundreds of new high rise apartment buildings thrown up using shoddy construction standards and never occupied. Haven't seen much on that since Covid lockdowns began but there was talk at the time that the building and finance schemes there could crash the world's economy again if it wasn't managed.

Yeah, the issue there is that all those housing developments, they "count" towards domestic "growth" which in turn strengthens the Yuan.

But the thing is, if those housing developments never get occupied then the "growth" that they were built to support never actually happens. So the cash flow behind that strengthened Yuan never materializes. So the government has to print more money for the cost of the exchange of goods to be covered. Either that or subsidize. When they do either, they erode that growth of the Yuan which devalues it. That means it takes more Yuan to buy the same amount of stuff.

That's called inflation.

But when your economy is propped up by government subsidies and price fixing on things like energy, you're teetering at the edge of a slippery slope. That's why China is clamoring for more energy reserves and doing predatory lending in places like Africa to gain control of natural resources. Otherwise, if they can't supply their own energy at a cost they can afford, they will have to go to the world market. When they do that, their demand alone is going to double energy costs. It will also mean there's less resources available which drives costs even higher.

When China can't prop up their economy with cheap energy, they will have to subsidize more to maintain the standard they currently enjoy. They more they subsidize, the more things cost the more inflation rises. They can't offer the cheap manufacturing they do without the government subsidized energy.

That runaway inflation from government subsidized energy what happened to Venezuela. The Venezuela government owns all the oil companies. That's the reason 7-Eleven severed their contracts with Citgo and either got rid of the gas stations at their locations or they changed suppliers.

Additionally, China has money to lend and they are going to start stepping up their interest rates to help cover the gap. That's going to mean every other economy that has borrowed from China is going to see a devaluation of their currency on the world market. That means that the exchange rates that make borrowing favorable for places like Canada, Germany and the U.S. are going to put most countries borrowing upside down on their debts. Only the big ones like the U.S., Germany and Canada will be able to weather that. That's real bad. Especially if China made loans to do stuff like build infrastructure. They already own several ports in Africa as well as rich mineral reserves that they have taken in exchange for debt repayment from the countries they lent to. But if you look at some of the actual terms of the lending and leasing agreements, the borrowing country never had a chance because the terms are dependent on growth rates within those countries in double digits and that will never happen.

China's economy is a paper tiger and a giant Ponzi scheme. If it crashes the whole world is going to feel it. Right now, they are losing their balance and teetering towards that slippery slope edge. Given what they did to themselves with the lockdowns and draconian measures, if they fall over the edge towards that slope any time in the next 5 years, they aren't going to recover. They will crash and burn and then there's another decade, at least, of rebuilding. Probably after a civil war as the people are becoming increasingly dissatisfied with the current regime of Winnie the Pooh.