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Xiang Songzuo, a professor at the prestigious Renmin University in Beijing, warned in a speech in Shanghai on Jan. 20 that real estate is one of a few serious "gray rhinos" — a potential risk that is obvious, but ignored — facing the economy this year.
According to estimates, about 80% of Chinese people's wealth is in the form of real estate, totaling over $65 trillion in value — almost twice the size of all G-7 economies combined. A significant slowdown could, therefore, have a substantial impact on citizens' financial health.
To him, Chinese people have "played around with leverage, debts, and finance, and eventually created a mirage in a desert that will soon entirely collapse."
In December, Xiang challenged the government's official economic growth estimate of 6.6%, saying it was actually just 1.67% — or possibly even negative — in 2018. He then went on to warn of a potential crash in the property market.
Home sales in tier 2 & 3 cities have slowed down sharply. 
“Perhaps more worrisome, though, is the growing number of Chinese property companies that appear to be struggling under the weight of heavy debt burdens. Moody's Investors Service has assigned junk status to 51 of the 61 Chinese property companies it assesses.”
Over the last 3 years, Chinese property has gone parabolic!
“Housing is a crucial means of asset formation in China, where ordinary citizens face restrictions to overseas investment & have few domestic options besides local stock markets which lost 25% of their value last year.”
“Housing is a crucial means of asset formation in China, where ordinary citizens face restrictions to overseas investment & have few domestic options besides local stock markets which lost 25% of their value last year.”
Prof Gan's striking estimate that 65 million urban residences — or 21.4% of housing — stand unoccupied was published in a report in December. The proportion is up from 18.4% in 2011 driven by a rise of vacancies in second- and third-tier cities, where demand is relatively weaker.
Prof. Gan warns of potential financial risk from the rising number of vacant houses. Of the 22.9 trillion yuan ($3.4 trillion) of outstanding mortgage debt held by Chinese people as of the end of 2017, 47.1% of that is tied up in residences that now stand empty.
This downturn in China, S&P's Roache says, may be "different" than ones in the past.
China could experience a more difficult downward cycle due to an aging population and unfavorable global environment, but high debt levels are a chief concern. It now stands around 270% to GDP.
China could experience a more difficult downward cycle due to an aging population and unfavorable global environment, but high debt levels are a chief concern. It now stands around 270% to GDP.
