I struggle to get my head around the size of the Chinese property collapse & it's global consequences.

[StrawberryMarble]

Is anyone else following this? Because it will affect us for sure down the line. 65 MILLION properties in China are in a limbo of being half built & the developers have run out of funds. This is way way bigger than the sub-prime crisis in the US. Blocks of flats are being demolished in their thousands. The Chinese government is pumping trillions in to keep the economy afloat. I think we're in for an unprecidented global recession that will bite longer & harder than ever before when you add in the cost of covid and the energy crisis.

China has a three child policy. The one child policy was scrapped in 2015 for a two child policy, and then that was scrapped in 2020 for a three child policy. It’s more their extremely strict immigration controls affecting their working age population than the # children policies.

They have relaxed the rules and are encouraging larger families, but the younger generation are not biting for all the reasons outlined above. I had a conversation about this with two Chinese students in their 20s, both born under the single child policy. They were preoccupied with caring for their ageing parents (and grandparents) and the pressure and expectations in the workplace. Neither were in a relationship. Marriage is pushed by anxious parents once you hit your mid twenties, whereas relationships are actively discouraged earlier as an unnecessary distraction from academic achievement. They said people their age don’t want larger families - even one child is considered a burden with all the other pressures they face.

Not yet. Wait ten years, it will.

That’s one home.

Thanks.

@onthefencesitter thank you. That explains when a friend was relocating to Singapore, the property sites showed a distribution that seemed oddly skewed to relatively high specification and expensive properties, compared with the 'fuller' distribution that Rightmove tends to show in the UK.

The fact that more people are making better choices and so living longer isn’t having the impact of increasing end of life costs.

I thought life expectancy had increased due to medical advances but healthy life expectancy is largely unchanged?

Possibly 10, but yes it’s clear it will fall

Yes, broadly speaking healthy life expectancy has stalled and varies hugely by wealth

Need to get on with work but place marking for all the very interesting info.

Thanks for starting thread.

Where is the data to show that people are leading healthier lives therefore healthier in the 60s and 70s but then naturally needing more healthcare in the 80s and 90s? If we strip it down the NHS is under pressure due to older people bed blocking and younger people making poor lifestyle choices and the consequences e.g. diabetes. I struggle to see how we are now all healthier than 50 years ago, frankly we seem to be very sick as a nation and this is undoubtedly linked to the amount of money you have.

The fact is it is easier for them to wring their hands about population than address the problem head on. Anyway this thread is about China so I don't want to derail.

Yes 85% of Singaporeans live in government flats. You can imagine how shocked I was when I moved to London that the government did not build housing for the average person! My poor father was so confused by the Help to buy scheme when he was reading about it; he could not conceive the idea of a government saying they were helping you but not even building the property they were marketing to you! There are some people who 'officially' live in government flats but they also own private property and overseas property (you can only own 1 government flat at a time and buy private property after 5 years of living in government flat; the reverse is not true which is why I can't buy a government flat even when I turn 35 as I already own a flat in London). However this would still be a minority.

Unlike in China, the average person is not exposed to the fluctuations of the global property market. The price of the government flats are to a large extent controlled by the government so they would not experience such drastic falls. the government is also unlikely to go bust so even when you buy a new build, you will get a new flat at the end of it. In contrast, investing in property in Asia is a lot more risky and even the price dips seem more drastic. My father bought our detached family home during the Asian financial crisis at 40% discount as well as commercial property at a similar discount but he also sold our old house at a loss of 500k. My father said that the person he bought from and the person he sold to both went bankrupt. The people who buy private condos also often buy it before its built and like in china, if the developer goes bust, you lose your money.

This is why I think the property crisis in China would get worse. In Asia, when the property market tanks, it really tanks.

Didn't know about this! There's going to be significant knock on effects with the amount of pension funds invested in China and supply chain issues with the amount that is produced. It's looking like a bleak few decades :(

council tax is not property tax. Renters pay it. If it was a property tax, only the home owner would pay it. It is a tax for the local services. Hence the person who is actually using the services- owner occupier or renter (rather than landlord) is paying it. I actually think council tax is basically an abbreviation of the original poll tax with some slight discrepancies due to property value.

The places in kensington and chelsea can pay less council tax as there are more businesses/hotels there. There is higher population density. There are Victorian terraced houses in Kensington that have been split into bedsits where each occupant pays council tax. There is often a younger population who do not use GP services and social care services so intensively.. It is up to each council to determine the council tax payable by each band but even the highest bands in London don't pay that much simply because there are more properties/households to shoulder the tax burden. A deprived northern town also probably have more people who get council tax discounts.

my SIL who was a part time student in Manchester was paying more council tax than me or my MIL in London at one point even though she was only occupying 1 room. This is because she was living in a hillel house (accommodation for jewish students) and the hillel house was actually a house that was adapted to house students (so in effect a house share). As she was the only person working part time, she was liable for the entire council tax which was over £2000.

This is why I think the property crisis in China would get worse. In Asia, when the property market tanks, it really tanks

Thats interesting.
How will the property crisis affect South Korea? In Seoul the cost of property just goes up and up and up making life for young people very difficult.

Sorry, council tax is a property occupancy tax. Not all property taxes are property owner taxes. The fact the tax is levied against the value of the property is what makes it a property tax.

Yes the taxes are used by local government for services. But what a tax is spent on doesn’t define the type of tax it is, the type of tax is defined by what it is levied against. So, income tax is a tax in income, inheritance tax is a tax on inheritance, dividend tax is a tax on dividends, and so. All these taxes can go to pay for any government expense from NHS to MoD to Foreign Aid, to MP expenses. Doesn’t make income taxes into MoD taxes or MP expenses account taxes.

London don't pay that much simply because there are more properties/households to shoulder the tax burden

But the cost of local services go up the more people you have. It’s not a case of we have 1 school no matter how many households there are or 100k black bins either. The more people, the higher the tax burden. No, the reason why London boroughs charge lower council tax is because they get the lions share of central government funding at a higher £ per person rate.

but the effect is still that people have a huge incentive to buy property. My rationale for buying my flat despite being sure it would not go up much in value(London flat market has been stagnant since 2017) was that if I rented a flat, i would still be paying council tax. So the only cost of buying my flat other than legal fees and a few thousand in stamp duty is the service charges every year ( when combined with the mortgage is still lower than rent). If i had to pay property tax, that would probably have skewed the figures and I would not have bought given that my DH is not enthusiastic about property ownership as a whole!

Yes it incentivises people to buy instead of rent, and also doesn’t unduly burden landlords with property taxes on homes they are letting out. There’s all kinds of pros and cons about different types of property taxes. In the US, property taxes are owner property taxes so tenants do not pay them. However, the rents are higher to compensate for that and landlords in the US can deduct the property taxes from their rental income when calculating how much income tax they owe to federal or state governments( unless in one of the few states with no income tax)

'Yeah, well, in China, if you don’t pay off your debts, that could land you on a so called deadbeat list, which is going to make your life miserable. And secondly, homebuyers, they still want these condos. Like if you’re a man, you need a condo to be considered marriage material. You need a condo to get your child into a good school. And if you’re in the middle class, which many are, property is still really the only form of investment available to you. So threatening to not pay mortgages is really a way to get the attention of the government rather than really defaulting.'

really interesting.

65 MILLION properties in China are in a limbo of being half built & the developers have run out of funds. This is way way bigger than the sub-prime crisis in the US.

Is there a crisis? From what I can see Chinas construction momentum has dropped from #1 in the world, to #4 but it’s nowhere near a crisis state?

“China has received an overall score of 0.67 on GlobalData’s February 2022 Construction Project Momentum Index, which provides an assessment of the health of the construction project pipeline at all stages of development from announcement through to completion”

“That score puts China in 4th place out of 11 regions, and is a decrease on its score from January 2022 (0.99) when it ranked in 1st place.

One reason for China's relatively good performance in the index is its industrial sector, which scores 0.86, putting it at 3rd place out of 11 regions worldwide.

www.investmentmonitor.ai/sectors/construction/the-state-of-construction-projects-in-china-february-2022”

Exactly. It's not like the choice is a binary between continued exponential rise or decline anyway, but when it's the latter that still presents significant social issues despite the environmental benefits. From a planetary perspective a quick reduction is the best thing. From a national perspective you'd rather your own population stayed stable or at least only declined slowly, and the societal impact of rapid population shrinkage was felt elsewhere. Although with a country as large as China there's not really a way for the rest of us not to be impacted by whatever's happening there anyway.

There's going to be significant knock on effects with the amount of pension funds invested in China and supply chain issues with the amount that is produced. It's looking like a bleak few decades

Do any of these pension funds claim to invest ‘ethnically’? If so, why are they investing in China which has a terrible human rights record?

I’ve read a few more articles and the ones screaming “crisis” or “collapse” are generally US media outlets, which lets face it are anti-China and are I think trying to mask the US own serious economic issues by saying “be happy you’re not in China”. They’re also skimpy on the numbers.

So real estate prices have declined for 11months in a row, no mention of by how much but I have to think if it was a crash/crisis/collapse, they’d say the % drop in value. So is likely a market correction being sensationalised imho.

www.163.com/dy/article/HEU8O60B0532WA50.html

根据国家统计局的数据，今年1-7月，全国商品房销售面积为78178万平方米，同比减少23.1%。商品房销售75763亿元，同比下滑28.8%，而住房销售同比下滑31.4%。- according to this, the volume of sales for residential property has fallen 31.4%

40个城市的房价都在下降，等等再买，房子正在越来越便宜？- the title says the house prices in 40 cities are falling, if you wait, the houses will become cheaper.

I would say sentiment on the ground is pessimistic.

因此，房价的变动，只有百分之一、零点几个百分点，在30%以上的销量变动中，是微不足道的。-- however this also says due to reduction of sales, the fall in prices isn't significant, around 1%?

That doesn't make much sense to me tbh.

Those talking about pensions - you'd hope that the fund managers have been doing their jobs and hedging/pulling out of risky markets. An asset manager I know started planning for a Chinese implosion almost 10 years ago...

Chinese apartment blocks are now being demolished in staggering numbers.