Why China's Crazy Housing Bubble REFUSES TO BURST!

china's housing market is ridiculous when first arriving in china i simply couldn't understand what was going on why were these poor quality apartments so expensive i mean rent was reasonable and pretty much what you'd expect but the cost of these for lack of a better word concrete boxes in the sky was ridiculous we all know that the average wage owner in china isn't making too much and i can confirm this having worked with and lived with many chinese people from all walks of life for over 14 years your average blue collar worker in shenzhen one of china's top four cities on par with new york la or san francisco and in fact the city with the most expensive real estate in china this is the city that i spent most of my time living in during the 14 years i was in china in this mega city the average blue collar worker is only earnings plus minus a thousand us dollars a month most of my friends and contemporaries were lucky to be bringing in six to eight thousand rmb and of course they're the lucky ones with office jobs in the tech industry etc the service industry workers and those in lesser jobs doing delivery cleaning jobs and the like were earning a pittance usually offset by their workspaces giving them free food and accommodation basically to offset the fact that they were being paid nothing i know people that were earning a thousand rmb or less a month your average factory worker living in the dormitories earning around 3 000 rmb a month this is not a lot of money and yet this city has the most expensive real estate in the entire country so how can someone earning around 12 000 us dollars a year afford a house that costs over 9 000 us dollars a square meter let me put that to you again a 90 square meter apartment that's around 968 square feet costs around 828 000 us dollars that's getting close to a million bucks for an apartment the size of a living room seriously and it's not even yours it belongs to the government you only have a 70 year lease and that's all to top it off it's poorly constructed and badly maintained you see these apartments drive china's economy they're built fast cheaply and not built to last in fact one could consider apartments in china to be less of an investment and more of a consumable as the chances of them actually surviving that 70-year lease are next to nothing i mean the entire city of shenzhen is only 40 years old and some of the apartments i've lived in and seen are in such poor shape that i doubt they'll be around much longer in fact this seems to be the plan knocking down old apartment buildings in order to build new ones is a big part of china's economic engine it goes something like this local government leases land to a construction company for a massive amount of money said construction company plans apartments and has a fancy sales event apartments are then snatched up feverishly as investments before ground is even broken construction companies shoddily constructs concrete blocks completely unfurnished and i mean unfurnished concrete unfinished walls no flooring no anything just an empty shell and people actually prefer it that way many apartments remain empty like this and for a good reason the property prices keep climbing and holding onto it in a raw state like this means you can sell it for more later you see part of china's superstitions is that you don't want to inherit any of the previous owners bad luck etc it's just bad feng shui especially down south so if the previous owner put in tiled floors did up the walls painted the walls installed plumbing fittings etc the new owner would rip all of that stuff out anyway if they decided to live there so you'll actually sell at a lower price if you've outfitted your apartment even if it is in immaculate shape that old stuff still needs to go so these apartments are then later sold on for a big profit and the whole cycle repeats itself government leases land construction company gets all the investments puts up these quick cheap nasty high-rises people invest in them sell them and the average person doesn't just invest in one but two or three apartments and we'll get into that a little later there is of course one very uncomfortable aspect to this whole cycle and that is where the land comes from because if there are people living on that land let's say historically farmers and such they usually get forced off either violently or through coercion in fact recently in guangzhou just this week there was a big explosion that killed five people inside a village planning office and this was because of land grabs at least that's what people are saying on chinese social media the local village government was trying to evict people off of land and they do this by offering compensation but it's usually not enough usually involves force and coercion the local people don't like it you often see tussles and big sort of in the rural areas riots and things when it comes to this this kind of land grab stuff so they try to force them off the land or they do force them off the land and then they can lease the land to these construction companies anyway this does often result in tragedy like what happened in guangzhou recently in the outskirts of guangzhou near panu but you know back to the whole having decorated your house thing say that you have purchased and have decided to decorate your apartment what now live in it well that would be ideal right you'd think so but no that's not the way it goes you see property is the only surefire investment in china the stock market has failed more than once and people are leery of investing in it i was there and in fact predicted the massive stock market crash of 2015 which led to many people losing their family fortunes the stock market has basically exploded since november of last year and this happens often in china when somebody earns a little bit of money you know word gets out oh you can make money through this and everybody just blindly follows and everybody's investing and i mean everyone all my clients my friends they all want to invest in the stock market i keep trying to warn them that this is not a good idea because china had a similar thing in 2008 i think it was where the stock market basically just fell apart because of the same reason everybody was just investing thinking it's a sure thing without realizing that there's actually a risk so um right now the stock market is really just crazy um if you happen to be in china if you are chinese if you know chinese people tell them to cool it off and watch out because i can see this being a bad thing in the near future uh even the chinese regulatory body has been warning investors to be careful because there's just too much investment going on and by family fortunes i mean extended family people were borrowing from parents uncles cousins you name it and then they lost it all and it was devastating i personally know several people who hit extremely hard and still have not recovered to this day there were people committing suicide jumping off buildings worst part was that these suicide videos were being shared on wechat you know china's big social media and it was not a happy time for china i'll tell you that much my point here is that people got burned by the stock market next peer-to-peer lending schemes took the country by storm as another way of investing money and that too crashed and burned spectacularly and the government even had to resort to its tried and true thug tactics to keep social order confining people to their homes putting pressure on family employers etc to prevent mass riots and protests by people who had lost huge amounts of their savings my wife actually being one of them i had wondered that it was not a solid investment but hey in china you follow the herd that's what people do your family your colleagues and everyone and their dog is doing something so that means it must be good and you should do it too that really is a part of chinese culture and it translates to the housing as well so without another solid option for investment the only solid platform for investing and making real money is real estate i know several people have made their fortunes simply by buying and selling apartments many of them lucky to have got in early but even late starters can see the value of their properties increase hand over fist year after year this is the big issue it has become a speculators market people buy houses not to live in but to trade in for free money after a few years down the line so why stop at one why not take up more loans why not take out loans from families banks and of course if regulations prevent you from taking out another bank loan just get a loan from a shadow bank basically a loan shock regulations prevent you from buying another house in your name no problem pay someone you know to put it in their name or one of the many creative ways people find to get around the regulations get divorced on paper get a different id and your mother's maiden name pay a relative use a fake identity etc etc etc if it can be done it has been done in mainland china remember there is no religion other than greed in the middle kingdom but we're forgetting something here how do we pay off these loans i mean the bank loan is one thing but don't forget most people have loaned money to front the deposit and get the bank loan in the first place yes chinese people save money well i've actually learned a lot about saving money personally having lived in china for so long but say you own two apartments and live in one of them if you're able to rent out the second one remember since everyone is buying apartments there aren't really that many people renting the rent doesn't cover the mortgage in the slightest for example the last apartment i was living in was a small two-bedroom apartment and i was paying 4500 rmb rent but the mortgage was around 20 000 rmb a month so me paying rent was only covering a fraction of the mortgage take into consideration that the owner was paying mortgage on multiple properties and probably not earning a very good wage so where is this money coming from savings can't be that vast so i'm guessing friends family and loans no doubt all because they know they'll make bank in a few years when they decide to sell and you guessed it when people sell they use that money to invest in more property usually they'll find a more developing area where they can buy the property cheaper and buy more houses and sit on it for a couple of years and then reap the rewards later and all of this for some concrete boxes in the sky remember you don't get any land with this deal you don't have a garden other than a big one shared in the apartment complex it was always absurd to me and yet it is the only way for the average middle-class citizen to invest money and make big returns on investment this crazy cycle will of course continue each time the housing market starts overheating the government steps in with regulations to cool it down a bit this only lasts until people find a way around the restrictions of course or if the economy starts to falter again the government lifts restrictions or they offer low interest rates or some such thing in order to kick-start spending again and the cycle continues but here's where things differ the houses must come down and they will they will be demolished and built again because building apartment buildings generate jobs sales of raw materials local micro economies for all the laborers that are bought in the migrant laborers and they feed china's economy in many aspects so knocking down and rebuilding shoddy apartment buildings is a wasteful but tried and true way to generate economic growth in china and remember in china if you build it they will buy i hope you've learned a little bit of what goes on with the chinese housing market and why it is so crazy in this video thank you to each and every one of you who watch my videos and support me that way and a massive thank you to anyone who supports me on patreon or anything else i love you all can't wait to see you in the next one and until next time you know the drill unlike the crazy unfair chinese housing market which is hitting chinese people the hardest because you're an up-and-coming guy you've got your first job you want to get married and you need to get a house what do you see in front of you just unrealistic and ridiculous prices that are going to throw you into a lifetime of debt and sorrow that's what you see so unlike that nonsense stay awesome

Channel: serpentza

Views: 495,364

Keywords: economy, stock market crash, China's housing, Ghost town, Chinese housing crash, Chinese housing bubble, collapse of economy, china, china economy, stocks, market crash, housing bubble, housing market crash, china housing bubble, chinese economy, economic collapse of china, china yuan, collapse of china, SerpentZA, Laowhy86, Cmilk, c-milk, advchina, adv china, advpodcast, advpodcasts, Winston Sterzel

Id: jDIhTc6CJYY

Length: 13min 1sec (781 seconds)

Published: Fri Mar 26 2021