Chinese Property Owners are in for a Very Rude Awakening, but the Damage Will Reverberate around Globe

Property mogul: “The biggest bubble in history.”

By Harry Dent, Senior Editor, Economy & Markets:

No question about it. China definitely takes the cake when it comes to bubble creation. The government encouraged everyday people to speculate in stocks in late 2014 and 2015 to help offset the slowdown in its gargantuan real estate bubble. The stock market bubbled 160% in one year and then crashed 50% (and you can be sure there’ll be more losses to come after a year of propping up a market that has merely gone sideways…)

Then to cushion that 2015 stock crash, the government made loans easier for real estate again. Bank loans surged by 7.5 trillion renminbi (RMB) in 2015 and are on track to surpass 15 trillion RMB by the end of this year. About half of these loans are in mortgages.

So what happened?

After flattening for three years, real estate prices went totally bananas again. They’re up 59% in the hottest large city, Shenzhen, since February 2015. They’re up 35% in Shanghai.

Just look at this bubble in Tier 1 cities. Real estate is up 48% since just February 2015! Since early 2010, it’s up 107%. That’s clearly the orgasmic phase of this bubble.


Shenzhen is the large industrial city outside of Hong Kong and it is now the next bubble city. Property prices there have surpassed Shanghai and Beijing prices for the first time.

But there are a number of Tier 2 cities that are bubbling even faster. Seven major cities have seen more than 50% growth in the square footage sold in the last year. These include:

  • The amount of square footage sold in Changzhou in the last year has increased by 138%.
  • Changsha saw an increase of 107%.
  • For Tianjin it’s 107%.
  • In Foshan, it’s 103%.
  • In Zhengzhou, 94%.
  • Hangzhou, 82%.
  • And Jinan, 65%.

Chinese billionaire Wang Jianlin calls it “the biggest bubble in history.” And the richest man in China, with a net worth of more than $30 billion, has been selling all of his real estate as fast as he can since early 2014. That’s what you call “the smart money!” Just like Baron Rothschild, selling a bit earlier rather than later is always prudent because bubbles tend to crash twice as fast as they build and real estate gets illiquid the fastest.

A Bubble Looking for a Pin

For more evidence of how bubbly China’s real estate is, look at this next chart from HSBC. It shows the total value of residential housing as a multiple of GDP, as is possibly the best measure of the situation over there.


China’s ratio (the red line) is currently 3.27 times GDP, and forecast to hit 3.72 times by year-end!

Japan’s great bubble (the black line) peaked in 1990 at 3.7 times GDP. Shortly after, property prices fell through the floor, losing 67%!

Hong Kong’s 1997 bubble peak (green line) was at 3.04 times.

The U.S. bubble peak (the blue line) in early 2006 was at 1.75 times.

And, as if that wasn’t bad enough, remember that China’s GDP per capita is only $8,240. It’s not nearly as rich as Japan ($44,647), Hong Kong ($36,117) or the U.S. ($56,000). It should not have debt or real estate at similar extreme values. Yet it does!

Hong Kong still holds the honors for the greatest bubble of all thanks to affluent Chinese laundering their money there, just like they are laundering it into other major English speaking cities around the world. Hong Kong’s housing value to GDP is now at 5.0 times and projected to go to around 5.5 by year-end.

Talk about a bubble looking for a pin! Chinese property owners are in for a rude awakening ahead!

But let me leave you with the most absurd thing I’ve seen since 400 sq. ft. condos in Vancouver selling for $500,000…

The new trend in Shenzhen is 66 sq. ft. “closet condos,” with a fold down single bed, selling for $132,000. That’s $2,000 per sq. ft.! That’s pricier than Vancouver’s tiny condos, only in a city where the typical person earns a little less than $20,000 a year! It takes about seven times their income to buy a closet studio apartment.

With the Chinese investing 75% of their wealth in real estate, the collapse of this bubble will completely devastate the Chinese economy. Bringing forth the domino effect, the damage will reverberate around the world.

Everything we can expect to see in the forthcoming crash is documented in our report, “China’s Impending Collapse: The Demise of the Red Dragon.” It gives a full breakdown and analysis of the devastation this crash will have on the global economy. Get the report in your inbox here.

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  31 comments for “Chinese Property Owners are in for a Very Rude Awakening, but the Damage Will Reverberate around Globe

  1. OutLookingIn says:

    Also, to compare the RE bubble in China to the US bubble, or for that matter, the Japanese market, does not equate to a level plane on the graph.
    Consider the US has 10 cities with a population of 1 million or more, whereas China has 160 such cities. Making the overall size of the RE market that much larger.
    For a comparator to be used that is balanced between the physical size of the different markets, a percentage does not work.

    • I did not know that !

      160 cities with a population of one million or more, wow !

      Moving forward from this exact moment, that fact will inform my thinking regarding every Chinese factoid that appears here or anywhere else.

      BTW, I believe the Planet Earth is already massively over-populated, so there’s that . . . . . .


    • Kevin says:

      There is a great tool at You enter the name of a US city, and it lists for you all the cities in China that are larger.

    • nick kelly says:

      Well of course it works- that’s the whole point of percentage- it’s adjusted for the size of the sample. The size of the Chinese cities doesn’t change the percentage.
      The one that is most interesting is Taiwan- the other China.
      With a GDP per capita of 21K it is triple that of the mainland.
      If the Nationalists had won the war,instead of demented Mao, China would have become the world’s largest economy decades ago.
      The CCP has set China back 50 years.

  2. Unitron says:

    Nice summary, especially when you consider how important housing is to the Chinese economy. The question is, will this be the final bubble to end all bubbles, and is it finally getting ready to pop?

  3. Chicken says:

    If you happen to believe plant Earth is massively overpopulated (which arguably it is, based on the argument of climate change alone), then perhaps you can imagine the perspective that must be causing extreme insomnia for environmentalists.

  4. Shawn says:

    How about a 15% property tax increase for foreign buyers in CA? Just like in Vancouver.

    • Wolf Richter says:

      I can imagine the fireworks this would produce.

      But that’s never going to happen here. CA has become dependent on Chinese money. Every governor goes to China on trade missions trying to attract more Chinese money. China and California are joined at the hip. So no one would want to create any additional ripples. To them, it doesn’t really matter that housing is becoming unaffordable for a big part of urban Californians.

      • Chicken says:

        “To them, it doesn’t really matter that housing is becoming unaffordable for a big part of urban Californians.”

        I thought the governors primarily spend time in China checking in on their personal investment holdings? As you point out, it’s not for the benefit of urban Californians (environmental killing machines wasting resources)

        • Thomas Malthus says:

          And I was thinking they were going there for to have 17 yr old hotties sit on their laps (and more) while they sang karaoke….

      • Richard of UK says:

        It is as if elites have more in common with their fellows in other countries than they do with their own countrymen. As this years Presidential election has shown, what is due to burst is the current political status quo.

        Not only has the property ladder been lifted up out of reach of more and more people but any opportunity for improvement.

        The elites are from Mars and mere mortals are from Venus, so separate are their societies.

      • Mick says:

        Governments create bubbles and governments pop bubbles. It certainly wasn’t in the best interest of the BC government to stop Chinese money from flowing into the province, but they did anyway.

        It only makes sense when we consider that governments hold loyalties beyond their own district and nation. They are globalists, and their objectives include creating a global government, which first requires destroying the current national governments.

        They start with destroying the economies of the current nations, like they’ve been doing for years. Maybe California won’t do it the way BC did, but rest assured, they will do it.

        • nick kelly says:

          Good God- how many conspiracy theorists are there?

          After the BC government finally responds to a least a year of intense public pressure about Chinese buying Vancouver real estate, they supposedly AREN’T doing it to be popular and get re-elected, they’re doing it to create the Sixth Reich.
          But will there be final struggle with the Illuminati?

          BTW: although the Chinese are a factor, they are only about 10% of the buyers. Surprise, surprise, it turns out there are a bunch of white, Canadian- born Canadians who like the idea of making a quick buck.

        • Wolf Richter says:

          Prices are set at the margins. It only takes a very small number of over-eager buyers to inflate prices. In that respect, 10% is HUGE.

        • nick kelly says:

          Agree it’s huge but my sister who has a degree, has traveled around the world on business and who ought to know better, thinks a majority of the buyers are Chinese.
          If she thinks that what do our redneck Trump types think?
          In Vancouver we are close to an outbreak of anti- Chinese racism of the kind that in the US is directed at Hispanics.

          The 10% of Chinese buyers throws kerosene on the fire for sure, but with roughly 40% of the population of BC crammed into greater Vancouver, there would be a fire anyway.

          I think the BC govt should take a look at encouraging the huge numbers in Vancouver on welfare to relocate to urban centers with more reasonable rents. And although there are drugs everywhere, you don’t get the violence of Hastings etc.

          More radically, I think the govt should take a look at homesteading, giving young folks on welfare or low wages a chance to build something.
          BC prices of rural acreage are at least double those 50 miles away in Washington State- the Crown i.e., the BC govt owns 90 % of the land here, creating an artificial shortage.

        • interesting says:

          “an outbreak of anti- Chinese racism of the kind that in the US is directed at Hispanics”

          what planet are you on? I have no idea what you’re talking about AND i don’t see Hispanics coming to the USA and overbidding properties by $1,000,000.

          Some of what people state as facts completely floor me……how many Hispanics do you even know?

        • nick kelly says:

          No prejudice against Hispanics, no WALL (that they’re going to pay for) ???
          Paul Ryan (ring any bells?) has rebuked Trump for saying that the judge in the TRUMP U case is biased against him because he’s of Mexican descent.
          Etc., etc.
          Read much?
          But true, the Mexicans aren’t accused of buying up expensive RE.
          When Irish and Italian etc. immigrants to the US were discriminated against, it wasn’t because they were buying up expensive real estate.
          The Mexicans’ sins according to Trump are being ‘rapists and drug dealers.’
          And taking away US jobs in picking lettuce, cleaning hotel rooms etc.

        • nick kelly says:

          Due to racist attitudes and actions towards himself and other Hispanics, Lee Trevino would not enter the clubhouse at Augusta.
          He changed into his golf shoes in the parking lot and walked directly onto the course

        • BigDaddy says:

          How come all my new neigbours are from China?

  5. Quadra says:

    Nice sq meter price. Is that the most expensive in the world?
    Makes me wonder if Yuan CHN should be allowed to be converted to other currencies. That level of dept calculated into USD is just scary

    • Kam says:

      Nick and Wolf
      The meme that there is only “10%” foreign buying in Vancouver is another barefaced media?political lie.

      Foreign buying, nearly all Hong Kong and Mainland China is more like 50%, with nearly all the buying done indirectly thru surrogates.

      • nick kelly says:

        I can’t say that you are wrong and of course when someone alleges a conspiracy it is difficult to disprove.
        But I can suggest a way of testing it: if 50 % of the buyers were from such a tight- knit ethnic group, with a different language, it would be very difficult for a realtor not part of the group to survive. He might have an edge with listings but that is only half the pie.
        No doubt a lot of realtors in VAN are Chinese, there are a few in Nanaimo now. (When my house was for sale in 2014 one showed it who barely spoke English, they wore booties and did some feng shui
        But a quick check of the Board(s) will reveal how many are Chinese.
        If 50 of the buyers are Chinese, almost all the realtors should be.

  6. Chicken says:

    At least it’s reassuring to know sub 7% growth for China is a big deal whilest sub 2% growth for the US is “very strong”.

    • nick kelly says:

      The US stat is more or less true- it can be sniped at but you won’t get arrested for doing so.
      The China numbers are NOTORIOUS for being BS. Based on imports and exports, that they can’t fudge, Chinese growth is at best flat to negative.
      Unless of course you buy Bloomberg’s line ( god knows where they got it) that Chinese job losses in concrete, steel, mining, aluminum ( a monster- 2 trillion US in a world- flooded market) are being replaced by ‘barbers, baristas, and baby sitters’

      Honest- that’s what they said.

      If you want a rare inside look at China enter Ann Stevenson-Yang and look for her photo on You Tube. She gives a presentation to a bunch of suits that is masterful.
      She’s cute too.

  7. Kevin says:

    I love the articles and analysis of China. It’s good to feel reassured that other rational people are observing the conditions here and arriving at the same conclusions I have. That it’s crazy.

    And I don’t mean crazy, like “You think you can get to the airport in 45 minutes? In this traffic? You’re crazy.”

    We’re in another dimension of crazy these days. When we’re risking a shooting war with Russia over Syria, of all places. When we’re adding $14,000 in new Treasury debt per household each year. When Chinese think it’s natural–wise even–to fork over fifty years of wages for a modest flat.

    Lunatic crazy. The whole world has gone insane, and it’s a small comfort to not be the only one who knows it.

  8. BRF says:

    Seems those that control the world through the issuance of debt are alive and active everywhere. Steve Keen has been a keen (no pun intended) observer of the rise of private debt in China. This rise in Chinese debt has achieved parity with private debt in America in six years, equaling that which took the Americans sixteen years.

  9. Tom Kauser says:

    The IMF and the FED would provide!
    With swaps and loans the Chinese people will be bailed out!
    We will get their gold!
    The banks see China as one party and families with two children?

  10. David says:

    I am a lowly English teacher in Japan, and I teach writing and presentation courses mainly. Recently, there has been a surge in students from all over China. The subject for both writing and presentation these last couple of weeks has been ‘My Home Town”. What I read and heard consistently was that every time these students return to China during vacation–spring, summer and winter, they witness incredible changes–new train lines, housing developments, redevelopment of central urban districts and so on. It may be a bubble, but the GDP growth rate must be quite high.

    • nick kelly says:

      Of course the GDP growth rate is high!
      Here is an example of unexpected GDP growth- a few years ago the UK narrowly missed a predicted recession.
      The reason- it was a cold winter and the fuel bills were just enough to lift GDP out of negative territory.
      Dave, buddy- you can build a f8cking pyramid and raise GDP.

      All the UK has to do is leave the windows open in winter.

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