Gi-normous Real Estate Crash imminent in China?

[marmar]

Beijing Seen Vacant for 50% as Chanos Predicts Crash (Update1)
By Bloomberg News


Feb. 12 (Bloomberg) -- Jack Rodman, who has made a career of selling soured property loans from Los Angeles to Tokyo, sees a crash looming in China. He keeps a slide show on his computer of empty office buildings in Beijing, his home since 2002. The tally: 55, with another dozen candidates.

“I took these pictures to try to impress upon these people the massive amount of oversupply,” said Rodman, 63, president of Global Distressed Solutions LLC, which advises private equity and hedge funds on Chinese property and banking. Rodman figures about half of the city’s commercial space is vacant, more than was leased in Germany’s five biggest office markets in 2009.

Beijing’s office vacancy rate of 22.4 percent in the third quarter of last year was the ninth-highest of 103 markets tracked by CB Richard Ellis Group Inc., a real estate broker. Those figures don’t include many buildings about to open, such as the city’s tallest, the 6.6-billion yuan ($966 million) 74- story China World Tower 3.

Empty buildings are sprouting across China as companies with access to some of the $1.4 trillion in new loans last year build skyscrapers. Former Morgan Stanley chief Asia economist Andy Xie and hedge fund manager James Chanos say the country’s property market is in a bubble.

“There’s a monumental property bubble and fixed-asset investment bubble that China has underway right now,” Chanos said in a Jan. 25 Bloomberg Television interview. “And deflating that gently will be difficult at best.” ..........(more)

The complete piece is at: http://www.bloomberg.com/apps/news?pid=20601109&sid=a6i2PSZD.Jr4&pos=11

[sharesunited]

1. Crash does not have the same meaning there, nor does it operate in the same way.

You don't get bailed out or file for bankruptcy. You get convicted of fraud and executed.

[On the Road]

4. I Doubt Much of This is Fraud

A lot of Chinese millionaires will lose their money, and a lot of regular families will lose their life savings.

China has an enormous high savings rate, but families sometimes invest those savings in risky ways and lose large amounts. I know a couple of construction workers who have small commerical buildings. It's very common and investors will suffer greater losses than Americans would trying to hold on to their investment. Some big cities like Beijing and Shanghai are enormously overpriced, though, and will probably crash no matter what.

Ironically, one way the Chinese could alleviate a real estate crash would be to open up the market to foreign investors. The Chinese government would have to be pressed to the wall for that to happen, but it bring in lots of foreign capital and could stabilize prices.

[On the Road]

5. dupe

[Skink]

2. being held up by U.S. mortgage backed securities no doubt.

[heli]

3. But remember China has $2.4 trillion in reserves

And they don't have a weird Congress like we do.