An example to illustrate the extent of real-estate overweighting for a typical Chinese city resident, and why Chinese government is trying to pull off a soft-landing for their property market:
some random 30yo in Shanghai whined about her "poor" life on Sept 5,2021.
some random 30yo in Shanghai whined about her "poor" life on Sept 5,2021.
The rough translation: her family owns 5 condos in Shanghai: 4 paid off, 1 with a mortgage. her parents live in 2, and 3 are rented out to pay for the mortgage. Her husband's family owns 3 condos in Shanghai, all paid off.
8 properties are worth ¥100MM in total
8 properties are worth ¥100MM in total
they live in 1 of her husband's properties. husband's parents live in another one and the third one is a rental property.
wife and husband are both the only child in their family. that's why she considers her parents' properties hers.
wife and husband are both the only child in their family. that's why she considers her parents' properties hers.
Here is the ironic part. This 30 yo lady was whining about her barebone (her words) budget of ¥20k per month, which is difficult for them with ¥6k gifted from the wife's family and ¥4k from the rental property of the husband each month. The wife and husbands are both unemployed.
They have ¥2MM in liquid saving, 50% invested in the stock market and 50% invested in "wealth-management" products.
The whole post is her whining about being poor with "only" ¥102MM assets.
The whole post is her whining about being poor with "only" ¥102MM assets.
The irony aside, for a 30-40 yo Shanghai resident who was born there and lives there all his/her life, owning 3 condos is now pretty average & common.
If they are buying new properties (e.g. the assets on Evergrande's book), it would be their 4th-8th properties.
If they are buying new properties (e.g. the assets on Evergrande's book), it would be their 4th-8th properties.
With that in mind, it is then not surprising that 92% of the homebuyers involved with Evergrande currently are speculators (i.e. they are not buying their first/primary residence).
~50% of Chinese M2 creation in 2020-21 were sucked into mortgages used to fund such speculation
~50% of Chinese M2 creation in 2020-21 were sucked into mortgages used to fund such speculation
And that's why China appears to be hellbent in cutting liquidity from property developers.
In the past 10 years, the investment modus operandi for Chinese middle-class families has always been maximizing leverage in real estate until their cashflow turns negative.
This has become a cultural thing, and you start to see Chinese students reflexively spend a lot of their spare time trying to get US mortgages in order to leverage up in their US real estate speculation upon arrival.
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