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Thread: Shanghai Property Bubble

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    Default Shanghai Property Bubble

    http://www.youtube.com/watch?v=QXNLF...eature=related

    Interesting video about the overcooked property market in Shanghai and surrounding areas. Some of the things said in the video from relator's are exactly what was being said in the US before the bubble burst.

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    Senior Member Oreka Bailoak's Avatar
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    I've never understood why people put so much money in Chinese real estate. One of my friends, an engineer with no financial background, showed me his stocks and he put something like 25% of his money in a Chinese real estate company simply because he noticed the price kept going up and up and up. The market is so overvalued and it's obvious; you can go walking around the real estate, business offices etc. in downtown Chinese cities like Shanghai and Beijing and many buildings in entire areas of cities are totally vacant. This means that the supply and demand for real estate is not in equilibrium. It means it's overvalued. And overvalued stocks should in due time eventually fall back to it's natural value level. Bubble Burst.

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    Veteran Member research_centre's Avatar
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    Quote Originally Posted by Oreka Bailoak View Post
    I've never understood why people put so much money in Chinese real estate. One of my friends, an engineer with no financial background, showed me his stocks and he put something like 25% of his money in a Chinese real estate company simply because he noticed the price kept going up and up and up. The market is so overvalued and it's obvious; you can go walking around the real estate, business offices etc. in downtown Chinese cities like Shanghai and Beijing and many buildings in entire areas of cities are totally vacant. This means that the supply and demand for real estate is not in equilibrium. It means it's overvalued. And overvalued stocks should in due time eventually fall back to it's natural value level. Bubble Burst.
    You mean like US, UK and European real estate? It's greed, which always backfires.
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    Veteran Member The Lawspeaker's Avatar
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    What goes up.... will come (crashing) down.

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    Quote Originally Posted by Oreka Bailoak View Post
    I've never understood why people put so much money in Chinese real estate. One of my friends, an engineer with no financial background, showed me his stocks and he put something like 25% of his money in a Chinese real estate company simply because he noticed the price kept going up and up and up. The market is so overvalued and it's obvious; you can go walking around the real estate, business offices etc. in downtown Chinese cities like Shanghai and Beijing and many buildings in entire areas of cities are totally vacant. This means that the supply and demand for real estate is not in equilibrium. It means it's overvalued. And overvalued stocks should in due time eventually fall back to it's natural value level. Bubble Burst.
    A lot of this is the myth of China. Most people don't know that China runs trade deficits with countries such as Brazil, so it has to run huge surpluses with the US. It'll affect commodities when it bursts too.

    Similar housing issues happened in 80's Japan, when lead to what's called the "lost decade" 90-99 japan stagnation. We'll see, China is just as insolvent as the rest of the world when it comes to banking. They can't dump dollars either, another popular myth, it just wont work, and they know it.

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    Quote Originally Posted by Civis Batavi View Post
    What goes up.... will come (crashing) down.
    Yeah, we could do with some affordable housing here too.

    People overestimate China, the sooner they crash the better.

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    Senior Member Oreka Bailoak's Avatar
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    You mean like US, UK and European real estate? It's greed, which always backfires.
    Yes, when people buy houses they can't afford and they default on their loans.

    Or when people select stock portfolios trying to obtain unrealistic gains of 15-20% (like investing in the current Chinese Housing market) exposing themselves to so much risk that they eventually lose half their money.

    Going for a good stock return like 7-8% is good greed.

    What goes up.... will come (crashing) down.
    No, what is overvalued will come crashing down.

    Many stocks actually raise their net value, in other words they create (and not artificially inflate like an overvalued stock).

    People overestimate China, the sooner they crash the better.
    Economics is not a zero-sum game. The better China does the better other countries do too. Also China has created a lot of net worth so they aren't going to just disappear. If China experiences even a major recession or depression then they will just be right back in the game in a few years.

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    Quote Originally Posted by Albion View Post
    Yeah, we could do with some affordable housing here too.

    People overestimate China, the sooner they crash the better.
    These things will reset in the next decade, housing is getting pretty overcooked in Canada lately as well, specifically in Alberta and Saskatchewan where the economies are doing very well.

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    Economics is not a zero-sum game. The better China does the better other countries do too. Also China has created a lot of net worth so they aren't going to just disappear. If China experiences even a major recession or depression then they will just be right back in the game in a few years.
    Indeed, I've long said they'll become another Japan soon enough - important and economically powerful, but no superpower.

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