Another Chinese real estate investment missed payment. So just how bad is this. I mean, evergrande seem to have fall out of news for no reason.
People have been predicting Chinese real estate collapse for over a decade. Now for some context, in that time, chinas economy has continued to grown to the envy of the world.
Now, specifically for Chinese real estate, let’s look at some incredible numbers. The real estate debt has grown to now accounting for over 40% of all debt obligation. China’s national debt to gdp went from barely 30% to now over 80%. Also, 64% of all local government revenue are funded by real estate development vehicle and land lease and real estate account for over 70% of household net wealth. Over 90% of all Chinese MBS are rated AA or higher.
As of late, the government is reducing required initial payment for home purchase, contemplating allowing 40 year mortgage, and opening up private individually directed retirement fund.
So either China has figured out a way to keep milking the real estate growth for seemingly forever, or we are looking at a house of card with a inevitable collapse that will make the MBS financial crisis in 2009 looking like a relative minor hiccup.