The Chinese Real Estate Dilemma

Today’s rant covers an unusual topic: China. No, not Chinese trade. We talk about that plenty. Rather, today I want to talk about a new angle on Chinese real estate.

Chinese Real Estate

The Chinese are strange real estate investors, largely because its communist governrnment had not broadly allowed real estate ownership until recently in history. It’s really only been the past 30 years or so, and during that time we’ve seen this massive urbanization project that has created the biggest bubble in history, and paradoxically amidst very high vacancy rates..

And all the energy thrown into real estate has only been self-perpetuating, with the nouveau-riche class now hell-bent on acquiring more real estate since they’ve seen its value and appeal increase.

They’re about to find that they’ve been very, very wrong.

Eighty-nine percent of Chinese real estate is owned, not rented. There’s not much of a rental market, only 2% of all housing in dollar value.

What’s that mean? It means we’re about to see a significant uptick in renting. It’s simple economics really: Real estate’s getting ever more expensive, making it harder to buy a home. Also, lots of people in China already own two or three homes, meaning there’s an abundance of housing stock with 22% of it empty. Many households have to inhabit jointly to afford and that is not what most would want.. So renting will have to get more popular, while those who bought so advantageously thus far will find that they’re the ones at the disadvantage.

Renting will be the big trend going forward at much more affordable prices freeing people to live without all of their relatives with them!

Strangest Real Estate Investor Ever: China

89% of Chinese real estate is owned, not rented…and 75% of Chinese net worth is in real estate. Harry Dent dives into the numbers behind Chinese real estate investment market, breaking down just how perilous speculation of empty housing developments could be…. even if it comes with a silver lining of self-correction. Sign up for Boom & Bust here:

Posted by Economy and Markets on Friday, November 1, 2019