A subset of ‘The Coming Collapse of China’ is the China real estate bubble, as in this 2016 Fortune headline: ‘China Real Estate Bubble: Will It Bring Down the Global Economy?’
China hasn’t collapsed. And, the bubble hasn’t burst because there isn't one big real estate bubble; instead, there are many smaller bubbles that rise to the surface, burst, and fall back, like the bubbles in boiling water.
You can see this in the graphic, left, which tracks housing prices in individual cities over the past five years. ….
Prices spike in a city. The government puts the screws on the market, and prices go down. Investment then switches to a city with lax policies. Housing prices spike; regulations tighten; prices go down. Investors move on. And so on, and so on.
As you watch the graphic, note the few times when full-press government policies stop all price rises and even cause decline. And, pay special attention to how Tier 1, 2, & 3 cities change places with each other. For fun, watch how Shenzhen goes off the chart, then spectacularly crashes as the local policies kick in.
This graphic was created by Robert Ciemniak and his colleagues at Real Estate Foresight in Hong Kong. In the video, below, Robert explains what is happening in real time (3 minutes). Fascinating.
Nobody understands the China real estate market better than Robert Ciemniak, founder and CEO of Real Estate Foresight in Hong Kong. Robert is not only a China property guru, but also a Reuters veteran and an international chess master. A wonderful and interesting guy, whom you should get to know.
And you should also get to know Real Estate Foresight. That firm is doing some of the best work on the China property market in the industry.
Robert will go into more detail about the China real estate market later this week. Stay tuned.
Write and tell me if Robert’s graphic has changed your thinking about the China real estate bubble. And, if not, why not? Thanks!