4 ms·

The incredible thing is that these homes are often not purchased with debt financing either, and when they do, it's with a much larger downpayment than in the U

The incredible thing is that these homes are often not purchased with debt financing either, and when they do, it's with a much larger downpayment than in the US as required by law. Chinese citizens have a much higher savings rate compared to Americans.

toomuchtodo 8y ago
Depressingly, when the Chinese housing market pops, it won't be investors taking the loss, it'll be Chinese citizens losing their life savings.
- dv_dt 8y ago
  Umm after 2008, the investors in mortgage backed securities didn't take a loss. Their securities were purchased en masse by the Fed via Quantitative Easing programs - about 4 Trillion worth. Edit: it might be interesting to see if there is a recession in China (or globally), how the central bank there might respond in contrast to QE schemes that the US and European central banks used.
  - nissimk 8y ago
    Many investors in mortgage backed securities lost quite a lot in 07-09. Your statement is false. The fed bailed out the big banks but smaller players wrote down many positions to 0.
    - dv_dt 8y ago
      Sure, not every dollar of every mortgage backed security was rescued in that way. But the imbalance you reference was yet another way that the rescue really didn't set up the economy for a healthier future - especially larger sophisticated investors were rescued, and both smaller players as well as many people bore the hardest hits.
adventured 8y ago
The Chinese consumer has leveraged up considerably in the last decade, to keep up with the rapid price increases in the economy. Their debt to household income ratio is quickly approaching the rate you see in the US. They appear to be making the same turn that the Japanese did from ~1998 forward, in going from being a nation of high savers to low savers and high debtors in a short span of time. "By the end of 2017, the ratio of total household debt to disposable personal income hit 107.2 percent. This number is above the level in the US before the 2008 financial crisis. The structure of China's household debt has also diversified. Housing mortgages only increased slightly in 2017. ... But other types of loans, especially short-term loans, increased rapidly last year. One reason for this is that families have to seek other ways to finance their home purchases due to the tighter controls on mortgages. " http://www.globaltimes.cn/content/1115334.shtml http://www.globaltimes.cn/content/1115334.shtml "China’s household finances look more stretched than those in most emerging markets, though the level of household debt remains less than that in most developed economies, Fitch Ratings said in a report on Tuesday. China’s household debt-to-disposable income ratio, a gauge of indebtedness, has jumped 9 percentage points every year since 2015, driven by mortgages and other consumer debts. If left unchecked, the ratio could hit 100 percent by 2020 versus 82 percent at end-2017, Fitch said. That would put China on par with the United States and Japan, whose household debt ratios are estimated to be at 105 percent and 99 percent, respectively." https://www.reuters.com/article/china-economy-household-debt/chinas-household-finances-look-stretched-versus-most-emerging-markets-fitch-idUSL3N1R92WJ https://www.reuters.com/article/china-economy-household-debt... "On the back of a boom in property prices, household borrowing has been climbing for 10 years straight, at a pace that rivals any such run-up in major economies. At $6.7 trillion, and a record 50 percent of gross domestic product, private debt is now approaching developed-world levels and crimping consumer spending power." https://www.bloomberg.com/news/articles/2018-04-24/the-7-trillion-debt-pile-looming-large-over-chinese-households https://www.bloomberg.com/news/articles/2018-04-24/the-7-tri...
- onlyrealcuzzo 8y ago
  To me, everything seems to point China's current situation mirroring almost perfectly Japan in the 90s. I must be looking at things wrong. It seems like no one is betting on it.

toomuchtodo 8y ago

Depressingly, when the Chinese housing market pops, it won't be investors taking the loss, it'll be Chinese citizens losing their life savings.

dv_dt 8y ago
Umm after 2008, the investors in mortgage backed securities didn't take a loss. Their securities were purchased en masse by the Fed via Quantitative Easing programs - about 4 Trillion worth. Edit: it might be interesting to see if there is a recession in China (or globally), how the central bank there might respond in contrast to QE schemes that the US and European central banks used.
- nissimk 8y ago
  Many investors in mortgage backed securities lost quite a lot in 07-09. Your statement is false. The fed bailed out the big banks but smaller players wrote down many positions to 0.
  - dv_dt 8y ago
    Sure, not every dollar of every mortgage backed security was rescued in that way. But the imbalance you reference was yet another way that the rescue really didn't set up the economy for a healthier future - especially larger sophisticated investors were rescued, and both smaller players as well as many people bore the hardest hits.

adventured 8y ago

The Chinese consumer has leveraged up considerably in the last decade, to keep up with the rapid price increases in the economy. Their debt to household income ratio is quickly approaching the rate you see in the US. They appear to be making the same turn that the Japanese did from ~1998 forward, in going from being a nation of high savers to low savers and high debtors in a short span of time. "By the end of 2017, the ratio of total household debt to disposable personal income hit 107.2 percent. This number is above the level in the US before the 2008 financial crisis. The structure of China's household debt has also diversified. Housing mortgages only increased slightly in 2017. ... But other types of loans, especially short-term loans, increased rapidly last year. One reason for this is that families have to seek other ways to finance their home purchases due to the tighter controls on mortgages. " http://www.globaltimes.cn/content/1115334.shtml http://www.globaltimes.cn/content/1115334.shtml "China’s household finances look more stretched than those in most emerging markets, though the level of household debt remains less than that in most developed economies, Fitch Ratings said in a report on Tuesday. China’s household debt-to-disposable income ratio, a gauge of indebtedness, has jumped 9 percentage points every year since 2015, driven by mortgages and other consumer debts. If left unchecked, the ratio could hit 100 percent by 2020 versus 82 percent at end-2017, Fitch said. That would put China on par with the United States and Japan, whose household debt ratios are estimated to be at 105 percent and 99 percent, respectively." https://www.reuters.com/article/china-economy-household-debt/chinas-household-finances-look-stretched-versus-most-emerging-markets-fitch-idUSL3N1R92WJ https://www.reuters.com/article/china-economy-household-debt... "On the back of a boom in property prices, household borrowing has been climbing for 10 years straight, at a pace that rivals any such run-up in major economies. At $6.7 trillion, and a record 50 percent of gross domestic product, private debt is now approaching developed-world levels and crimping consumer spending power." https://www.bloomberg.com/news/articles/2018-04-24/the-7-trillion-debt-pile-looming-large-over-chinese-households https://www.bloomberg.com/news/articles/2018-04-24/the-7-tri...

onlyrealcuzzo 8y ago
To me, everything seems to point China's current situation mirroring almost perfectly Japan in the 90s. I must be looking at things wrong. It seems like no one is betting on it.