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China real estate bubble

Tracking China’s Real Estate Binge

Steve Saretsky -

How China’s Real Estate Bubble Overflowed Across the Globe

As foreign buyers start to dwindle in Vancouver (new data shows foreign buyers are diminishing) we are left scratching our heads, bewildered, how could the typical detached home suddenly cost over 1.4 million. Did Governments and policy makers not see this coming?

Foreign Capital fleeing China is no secret. In recent years it has become a global phenomenon, widely publicized for helping push real estate prices to euphoric new highs in other cities such as New York, Miami, Seattle, Sydney, London, Stockholm, and Munich the list is endless. Perhaps most ironically, China has inflated a real estate bubble of their own.

Real estate bubbles globally
Bubbly cities

China has been on a debt binge, a credit expansion post 2008 financial crisis. Which has resulted in them inflating their own real estate bubble. It’s become so obvious that even those within the industry are concerned. Chinese billionaire Wang Jianlin who made his fortune developing real estate in China calls the current situation the “biggest bubble in history.”

Chinese mortgage binge
Chinese Mortgage Binge. Source: Bloomberg

Things have gotten so out of control Beijing recently announced it would takes steps to keep home prices from spiking further by raising the down payment required for second homes and suspending some housing loans.

“There is a bubble in the Chinese housing market that is undisputable, but the problem might be the bubble has grown out of expectations and led to some unstable developments in the property market,” Yan Yuejin, from the Shanghai-based E-house China R&D Institute, told the Global Times on Sunday.

The bubble has inflated to epic proportions, expanding across the globe, most notably settling here in Vancouver.

As obvious as it is now, we were coerced into turning a blind eye. A make believe world where foreign buyers make up no more than 5% of Metro Vancouver transactions and property transfer tax revenues soaring by nearly half a billion dollars is the new norm. Dependant on the Chinese real estate binge to support prices and keep the economy afloat while also trying to make homes affordable for locals. One hell of a juggling act.

Keep your eyes on China.

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The Saretsky Report. December 2022