4 ms·

Here is Chanos in Nov 2010: -5×5 office cubicle for every man/woman/child in China -New Residential real estate accounts for 15% of GDP -60% of GDP is toward

by nrao123 12y ago

Here is Chanos in Nov 2010: -5×5 office cubicle for every man/woman/child in China -New Residential real estate accounts for 15% of GDP -60% of GDP is towards fixed asset investment -Buyers in China purchased 44% more residential space than they did in 2008 -Dubai during its peak had 240 sq. Mtrs/1million dollars in GDP. China has 4x that. -Lending went up 95% yoy 2009-2008 and up 60% through 2010 -Perpetual China Bull – Goldman is forecasting a 10-20% decline in housing prices in 2011. -Chinese vacancy rates are accepted to be unusually high but exact numbers are extremely hard to find. The Chinese investors essentially treat real estate investing as investing in Gold without even bothering to rent them out because of the unusually low rents. http://finance.fortune.cnn.com/2010/11/17/chanos-vs-china/ http://finance.fortune.cnn.com/2010/11/17/chanos-vs-china/

simonh 12y ago
Rental rates indicate the real economic value of a property, as against it's notional or book value as an investment. If rents are pitifully low even during an economic boom, that doesn't bode well for property prices when there's a bust.
prewett 12y ago
I'm not sure I understand the relationship of this Chanos article from 2 years ago to the posted article, whcich details comments from the Nomura Group, which, as far as I can tell, has no relationship to Chanos. I also disagree with some of Chanos' points regarding rent. At least in Beijing, rent is quite expensive, and unaffordable for most Chinese. Unmarried people live with multiple roommates in places that, to the American eye, look like slums. Rents in Beijing went up an average of 20% last year (although we talked my landlord down to 10%, I think). Now it might be that rents as a proportion of the owner's income is not worth the hassle, thay could very well be. But rents in Beijing are not affordable. Regarding vacancies, the common wisdom among expats in Beijing is that the reason is that people consider apartments to lose value if it is rented. That might be related to the reputation of Chinese renters; I have heard from a number of sources that renters in China often trash the place, although I have no way to verify that. Anyway, if the point of the parent post is to say that this article is incorrect because some cried wolf two years ago, I strongly disagree. 20% rent increase per year (or even 10%) is not sustainable. Nor is that exponential curve in the article sustainable. The crash may or may not have happened, and may or may not happen in the future, but the current situation cannot continue forever.

by nrao123 12y ago

simonh 12y ago

Rental rates indicate the real economic value of a property, as against it's notional or book value as an investment. If rents are pitifully low even during an economic boom, that doesn't bode well for property prices when there's a bust.

prewett 12y ago

I'm not sure I understand the relationship of this Chanos article from 2 years ago to the posted article, whcich details comments from the Nomura Group, which, as far as I can tell, has no relationship to Chanos. I also disagree with some of Chanos' points regarding rent. At least in Beijing, rent is quite expensive, and unaffordable for most Chinese. Unmarried people live with multiple roommates in places that, to the American eye, look like slums. Rents in Beijing went up an average of 20% last year (although we talked my landlord down to 10%, I think). Now it might be that rents as a proportion of the owner's income is not worth the hassle, thay could very well be. But rents in Beijing are not affordable. Regarding vacancies, the common wisdom among expats in Beijing is that the reason is that people consider apartments to lose value if it is rented. That might be related to the reputation of Chinese renters; I have heard from a number of sources that renters in China often trash the place, although I have no way to verify that. Anyway, if the point of the parent post is to say that this article is incorrect because some cried wolf two years ago, I strongly disagree. 20% rent increase per year (or even 10%) is not sustainable. Nor is that exponential curve in the article sustainable. The crash may or may not have happened, and may or may not happen in the future, but the current situation cannot continue forever.