Should you be bearish on the china property market?
And how much of The US economy will be affected?
Should we start focusing on the downfall probability of the Chinese housing market?
As for the US market, we are now heading towards a more positive direction, with signs of slow but steady growth in the industrial sector. I think if we look at it worldwide, the US market is doing OK, compared to Europe that still has problems and China is headed for a fall, maybe taking some of Asia with it and some of the natural resources economies like Brazil, Australia of course all of this will depend on the falling housing crisis in China. If it happens everyone will be affected. Actually, the question is not if it will happen, but When?
Like always, the toughest part of this is timing, as for now, the Chinese market is down 20% from last year. I believe the tipping point, the moment when China will be facing this downfall is when we start getting consistent reports that construction has stopped. The most probable signs of this happening will be when cranes will stop multiplying or getting higher, and buildings will be at a standstill.
So far, this hasn’t happened!
If you take a good look at the Chinese banking system, they have expanded and increase total credit of 35 percent, for 9 percent GDP growth, and that is just unsustainable. Constraints are unavoidable.
Recent reports indicate construction percentage for the Chinese economy represents 70 % compared at the peak of 2005 -06 in The USA was about 16-17%.
2.5 million new homes were built at the peak of the US economy market in 2005, and China is headed for 25 million new home by the end of this year. And total value of residential real estate in China is approaching the same scary number of japan in 1989.
With the numbers being what they are, and the data being what it is, the property bubble seems more and more tangible as time move forward. So basically, if this fundamental view ends up being wright, then as an investor you can help your performance by having a certain edge on future probabilities in this unforgiving, ruthless market.