Developers in China Punished for Land "Hoarding"

China can't use policy to impact the "hoarding" of empty finished, perfectly livable apartments, so they have resorted to encouraging developers to build more units for speculators to leave empty.

China orders land hoarding freeze as prices rise

The country's land and resources ministry on Thursday published a list of 26 cases of land left undeveloped and the names of the property developers involved, with strict orders for authorities to punish the offenders.

Real estate developers who have left land vacant for one to two years should be fined, while property left undeveloped for more than two years should be returned to the government, the statement said.

Authorities intend to build 10 million units of social housing in 2011, after completing 3.7 of the intended 5.8 million in 2010. China doesn't fear a tulip bubble, they fear unrest. One assumes they have controls in place to keep these apartments out of the hands of speculators or they are wasting their time. Xie thinks they need 20 million units to satisfy demand

Teranet Canadian House Price Updated for October 2010

Teranet housepriceindex.ca

Vancouver was flat September to October, but nationally prices were down 0.45%

Toronto (the biggest weight in the index at 42%) was down just shy of 1% September to October and down 2.46% from the peak in August 2010.

Vancouver's raw data peak was in June 2010 (down 0.96% from then), the three month smoothed peak was in August 2010.

Of the six cities in the index, Calgary has recorded the largest drop of 3.7% from the raw data peak in July 2010.

A Post-Holiday Surge in Australia Bubble Articles

From utter silence before Christmas to a chorus of articles. Given how slow data are coming out of Australia, I can't help but suspect that the media, getting early whiffs of trouble, are not in CYA, oh-we-saw-it-all-along-despite-our-previous-endless-cheerleading mode.

Australian house price inflation leads world
Year to year price growth was 9.4%, down from earlier in the year. Year to year March 31 growth was 15.9%.

Australians lap up overpriced real estate at auctions

The emotionally charged auction process, however, has helped fuel Australia’s runaway housing sector, where gravity-defying prices have some analysts warning of an impending implosion that could drag down the country’s long-running economic prosperity.

Down Under housing market booms, Canada simmers: Scotiabank

Canada, by contrast, saw higher housing prices, but only about half of Australia’s, or around 6 per cent. And now Scotiabank is ambivalent about the prospects for the coming year.

China: This Time No One Is Listening

In the past, technocrats have kept ahead of speculative frenzies and controlled growth. Not this time.

China's Real-Estate Frenzy

Understanding government policy has long been the key to making money in China's property and stock markets.

The main tools to regulate growth were administrative: government orders to banks to stop lending and to companies and local governments to halt projects. And that's what Beijing is still trying, increasing banks' reserve ratios and cutting lending quotas.

But this time nobody is listening. Local governments and banks have set up off-balance sheet vehicles to conceal loans and keep the spending boom going. Fitch Ratings estimates that not only did banks exceed the central bank's 7.5 trillion yuan ($1.1 trillion) cap on lending for this year, they made an additional three trillion yuan of these shadow loans.

At the peak of the bubble, US houses cost 6.4x average earnings, Beijing currently is at 22x.

Foreign Investors That Funded Australia Housing Boom Growing Cautious

Foreign lenders get the property jitters

Official figures show our banks now owe overseas investors a record $352.7 billion, equivalent to 27 per cent of the country's entire economic output.

If the global economy recovers strongly that could push interest rates up a lot, and that's a real risk for Australia's because rates are already high and house prices are becoming an issue," said Trevor Greetham, asset allocation director at Fidelity Investments in the UK, which has $3.4 trillion under management.

Analysts said if Mr Greetham and others like him withdraw funding, then our banking system will be plunged into a catastrophic credit crunch. Mortgages will be rationed, minimum deposit sizes will be forced up and property prices are likely to collapse.

Gerard Fitzpatrick, global fixed income portfolio manager for Russell Investments, said he was increasingly cautious about lending to Australian banks.

Speaking from London last week, he cited the recent catastrophe in Ireland, where the house price bubble effectively broke the banks.

Hot Money In, Smart Money Out

China raised interest rates 25 basis points last night. Like tilting a giant bathtub, hot money will naturally roll in. But the smart money has been trying to get out of China.

Outlook 2011 and the Next Decade: China: Is the Smart Money Right

The country has major infrastructure issues, troubling population dynamics, poorly aligned employment outcomes, inflation problems, a real estate bubble, an opaque and potentially insolvent banking system (had mark-to-market accounting been applied), geo-political problems with North Korea and Taiwan, and an underperforming stock market in 2010 (see stock comparison chart).

So, multiply the bad business project factor by ten and you get an understanding of the magnitude of bad loans on the books of Chinese banks. The problem is being further exacerbated by the practice similar to Spain`s of banks making additional loans to the businesses just so that they can then turnaround and pay back the interest owed on the original loans.

Victor Shih, a Northwestern University professor estimates that Chinese local governments borrowed some 11.4 trillion renminbi at the end of 2009, and that local government financing loans to be roughly one-third of China's 2009 GDP. . . .

Signs of Trouble Downunder

Mortgage applications down. Retail sales down.

High home ownership rates coupled with rising cost of ownership are taking a toll on the rest of the economy.

Retailers cry poor as sales drop sharply

Harvey Norman boss Gerry Harvey said there would be "blood on the streets" in the retail sector because business is so bad, the worst since the recession of the early 1990s.

"It's a crisis, the worst in 20 years," he said.

I'm still thinking that the real downleg of the housing crash will come after the government panics and drops rates.

Strange Summer Selling Season

According to the ABS data, in round numbers, there were only 48,000 loans approved in September 2010 compared to 65,000 for the same month in 2009.

5 Reasons China Will Crash in 2011

5 Reasons China Will Crash in 2011

1. The Great Chinese Credit Bubble
Sure the banks will bail everyone out, but if Mark Hart is right, they Chinese debt to GDP is between 107 and 200%. They may not have as much on hand to cover the massive bad bets.

2. The Great Chinese Labor Force
Over the next five years China will add labor force members equal to all those in the U.S. and Europe, a big deflationary force. (This assumes they can keep the giant yuan game going, however . . .)

3. The Great Chinese Commodity Gobbler
Too much of a good thing driving imports up while the Chinese export capacity is "staggeringly" over capacity.

4. The Great Chinese Currency Reserve
The Chinese have trapped themselves between inflation or devaluing their foreign denominated bonds by letting the yuan appreciate.

5. The Great Chinese Nation-State
This prediction seems a bit weak. Other nations are still quite timid about criticizing China let alone actually taking significant action, trade or otherwise.

Chinese Developer Issuing Yuan Denominated $ Bonds

Aside from the creative nature of this bond issue, the more interesting points are:

Their apparent confidence with moving the money raised during the bond sale back into mainland China.

The currency risk has been transferred entirely to the investor, the rates were low for bonds of this type, and the bond issue was a roaring success ($450 US). Who was it said be fearful when other are bold? For some reason that leaps to mind here.

A No-Yuan Approach to Yuan-Bond Sales

New China Bank Rules Affect Capital

The government is making more moves to protect from expected losses in development loans.

This time banks are expected to (or already have instituted, it actually isn't clear from the article) raise the assigned risk weightings from 50% to 100% for loans covered by cash flows and to 300% for those not.

China’s Risk-Weighting Rule May Cut Banks’ Capital

The government is trying to limit risks stemming from last year’s surge in loans to local-government finance vehicles for roads, bridges and railroads. Chinese banks may struggle to recoup about 23 percent of the 7.7 trillion yuan ($1.2 trillion) credit they’ve extended, a person with knowledge of data collected by the industry regulator said in July.