What’s Really Going On In China’s Real Estate Market?

Over the past 10 years in China, home prices in the vast majority of the country’s 2nd to 4th tier cities doubled in value and then went back down around 20%.

People want you to ring alarm bells about THAT?

At the ends of that statistical bell curve, some areas have had even less depreciation than that while other cities have had more.

The buyers who have had more are the ones who got hurt worst financially. They are the minority NOT the majority.

Western media headlines and stories on this print as if it’s the majority that are suffering. They are NOT.

Let’s take a 2nd tier city example, Shenyang, the capital of Liaoning province, where I live. It is not one of China’s more robust economic centers like say, Chengdu and Chongqing. It’s a rather typical 2nd tier city, slowly becoming a first-tier city. But it won’t ever blossom hugely like say, Shenzhen or Shanghai, because of the long, cold winters we have up here in the northeast. Yes, by the way, a huge automotive industry sector is centered here with BMW.

The majority of family households around China’s 2nd to 4th tier cities are like households here in Shenyang.

1. Living in a home with no mortgage at all or a mortgage of less than half the current value of their home.

Keep in mind, IF they did get a mortgage with at least 30% down and it was typically a 15-year mortgage that is now 80% paid off.

NO bank in China was ever offering 30-year mortgages back then, maybe 20 years, and few Chinese households are dumb enough to take a 30-year mortgage and the banks here even warn them not to, as opposed to the United States where they encourage you to, because screwing you for more interest profits is a normal banking thing in the U.S., not here. Truth hurts, I know.

2. It’s a home that the Chinese household paid 5k psqm for 10 years ago that doubled in value to 10k psqm.

3. And the value is now back down to 8k psqm.

So an apartment was bought for 150k USD.

Went up to 300k.

And is now back down to 225k – 250k.

With a mortgage balance today of less than 30k, IF there is a mortgage.

Oh the horror, right?

Speculators are a small group, they are the exception to the rule, not what’s happened to the vast majority of Chinese households’ property.

Next, You need to understand that Western media headlines are part of the propaganda campaign to make you feel good about the 50% inflation YOU just experienced over the past 4 years, which we here in China did NOT experience.

Western government representatives and mainstream media together don’t want you to feel bad about that.

They want you to rationalize and feel good about getting screwed.

Therefore, they are knocking and criticizing China for NOT having:

● Housing inflation
● Rent inflation
● Food inflation
● Healthcare inflation

The inflation that is ruining your lives.

Chinese households have massive savings in their bank accounts.

And no, 70% of Chinese households did not invest their entire life savings to buy apartments as investments.

Perhaps 10% of households did that and if they did it within the past 5 years, they have lost anywhere from 20% to 50% of those home values which will require the next decade to creep back up slowly.

Yes, lower middle-income households in China are struggling, a lot of them were small businesses that lost too much during the recent pandemic years, And they are a huge chunk of the urban population totalling around 500 million people.

On the other hand, the upper middle-class category is massive and doing very well, carrying the strength of the economy here still growing. They are around 200 million people.

That’s what happened, that’s what’s really going on and that’s what I expect.