14 Charts That Show China's Dangerous Housing Bubble Is Far From Over

china angel

China’s real estate rocketship started slowing down this summer and even registered a small property price decline in June. But the potentially catalysmic drop-off hasn’t happened yet.

Jing Wu and other economists at NBER say Beijing is stuck in an unprecedented real estate bubble that will be painful to unwind (via Econbrowser). Unfortunately the bubble could be popped by a decline in prices OR production:

Private housing investment accounted for 15.1% of total investment volume in urban areas in 2008, and 13.2% in 2009. The private housing sector currently accounts for over one third (37.1% in 2007 and 36.9% in 2008) of the buildings completed by the construction industry, and the construction industry is one of the most important industries in China. Its output constitutes 5.7% of Chinese GDP; it employs 14.3% of all workers in urban areas; and it consumes about 40% of all steel and lumber produced in China.

To avoid a big collapse, Beijing needs to clamp down on speculators. And it needs millions of Chinese to move to the city and rise to the middle class.

140% nationwide house price rise since 2007

Outstanding real estate developer loans are up 50% in two years

Most Chinese used to live in EMPLOYER-OWNED developments. This was changed by decree in 1998 -- causing the takeoff of private homes

Demand has increased by rapid urbanization -- however not enough to explain price increases

A sign of systemic risk: local governments now rely on land auctions for revenue

Beijing land prices is up 788% in eight years

State-owned enterprises -- which pay around 27% above market value -- are leading the property grab

Land value is outpacing property value in Beijing

How much does population growth explain price growth?

Supply-Demand looks particularly skewed in Shenzhen

Unfortunately, the building spree has spread beyond China's biggest cities. That will make it harder to keep up demand

Purchase price is outpacing rental price -- another indication of speculation

Likewise, price increases are killing income increases

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