> This bodes very ill for creditors. Foreign creditors account only for $25B of the $300B liabilities for Evergrande.
I'm sorry - but any foreigner who lent Evergrande money thinking this wasn't a huge risk is a moron.
> This will accelerate the real estate price decline in all parts of China, on top of the 30-40% drop we're seeing in Tier 1 cities, on top of the 50-60% drop we're seeing in non-Tier 1 cities.
According to "official" sources - property prices aren't even down 5%. Where are you seeing that they're down 30-40% in Tier 1 cities?
It would take the median couple >7 years saving 100% of post-tax income to afford a downpayment on the median 100 m^2 condo. If you assume even 3% interest - thereafter - the monthly payment would be >80% of their COMBINED post-tax income.
China's property prices have astounded me since 2000 - and yet they continued to rocket higher for a solid two decades.
People are NUTS in the US at Price to Income levels of 4:1 - when this is some of the lowest Price to Income for housing in the world. We consider places like Vancouver and London and Sydney ludicrous bubbles - and yet they are usually below 10:1. China was at 11:1 in 2000 and climbed to 17:1 by 2020: https://lipperalpha.refinitiv.com/2020/06/chart-of-the-week-... Places like Shanghai have ratios of 38:1 and higher.
> any foreigner who lent Evergrande money thinking this wasn't a huge risk is a moron.
Or they are very smart while investing your money. Check your country's pension fund, see who manages it and what they invest in. Or better yet, don't.
i live in shenzhen and i would love it if prices dropped 30-40%. i'd buy an apartment immediately lol. i've been checking real estate prices every once and a while for about 5 years now ready to buy if something shows up at a good price in an area i want to live in
the reality so far is that prices have pretty much stayed flat for the past 4-5 years. there hasnt been any significant fall anywhere within like 1 hour of me in shenzhen
Pre-owned housing prices in Shenzhen fell by nearly half from their peak in 2020 after holding up over the past two years of plunging new-home values amid slumping demand and a liquidity crunch for developers.
Meanwhile, according to Leyoujia store transaction data, second-hand housing prices in Shenzhen in the fourth quarter of 2023 were around 65,000 yuan per square meter, down 12% from 2022, and 22% lower than the all-time high in the first quarter of 2021. The transaction prices in some areas and real estate have already returned to 2018, and the drop compared to the highest point was as high as 30% to 40%.
The vast majority of Evergrande's outstanding foreign debt is from >2012.
BlackRock, HSBC, and UBS poured in about $3B of the $25B in 2021 alone...
And, I'm sorry - if you didn't see a risk doing that in 2021 - you're gonna lose all your money sooner or later.
In BlackRock's case - it was primarily for 401k-ers for exposure to Chinese bonds. I think the US should've made it illegal - and probably will soon - to offer a product like that.
Why anyone in the US would want exposure to Chinese bonds that don't even have good yields for "diversity" is incredible. Up next - Russian and Venezuelan 100-year bonds at 0% interest!
2012 was the year that Andrew Left publicized why he was shorting Evergrande stock, which he got banned for in 2016. I would say 2010 was when Evergrande started popping up in the news as possibly insolvent, 2000 is too early.
The Kremlin has been saying that if the $300 billion worth of Russian Central Bank assets that were frozen in response to the invasion of Ukraine are confiscated (e.g., to give them to Ukraine), the Kremlin is going to respond by confiscating assets in Russia held by Westerners.
What does that have to with bonds the government might refuse to pay out (or western governments might ban you from receiving payments even if they don’t)?
Not sure why anyone would actually trust official numbers from China. China still claimed 5% gdp growth last year. pretty laughable.
Also, you can just watch what multinationals are doing. They have retail numbers from their Chinese stores. And it's pretty clear Japanese and Taiwanese and South Korean and American and European multinationals are all withdrawing.
"Existing homes near Alibaba Group Holding Ltd.’s headquarters in Hangzhou have dropped about 25% from late 2021 highs, according to local agents."
"Even as of March, before a fresh slowdown, more than half of tier-2 and tier-3 cities saw existing-home prices fall more than 15% from peaks,"
"residential housing prices in tier 3 cities dropped by nearly 20%."
EDIT: Again, to get the real numbers, you need to have access to Chinese real estate agents. And these folks aren't going to be posting articles for everyone to read. Or if they post a video in anger, it will get taken down.
Nice stats but people want housing condition to improve not degenerate to other countries lows. Should we thank our western overlords for sparing us from those conditions? No.
I'm sorry - but any foreigner who lent Evergrande money thinking this wasn't a huge risk is a moron.
> This will accelerate the real estate price decline in all parts of China, on top of the 30-40% drop we're seeing in Tier 1 cities, on top of the 50-60% drop we're seeing in non-Tier 1 cities.
According to "official" sources - property prices aren't even down 5%. Where are you seeing that they're down 30-40% in Tier 1 cities?
It would take the median couple >7 years saving 100% of post-tax income to afford a downpayment on the median 100 m^2 condo. If you assume even 3% interest - thereafter - the monthly payment would be >80% of their COMBINED post-tax income.
China's property prices have astounded me since 2000 - and yet they continued to rocket higher for a solid two decades.
People are NUTS in the US at Price to Income levels of 4:1 - when this is some of the lowest Price to Income for housing in the world. We consider places like Vancouver and London and Sydney ludicrous bubbles - and yet they are usually below 10:1. China was at 11:1 in 2000 and climbed to 17:1 by 2020: https://lipperalpha.refinitiv.com/2020/06/chart-of-the-week-... Places like Shanghai have ratios of 38:1 and higher.