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Strategies & Market Trends : Mish's Global Economic Trend Analysis -- Ignore unavailable to you. Want to Upgrade?

To: RealMuLan who wrote (13916)	10/23/2004 7:27:58 PM
From: mishedlo	Read Replies (4) \| Respond to of 116555

Thanks BTW I was not really looking for anything but your honest opinion. Have you got one about China's demand for oil, copper, steel, soybeans? Thanks

To: RealMuLan who wrote (13916)	10/24/2004 8:48:39 AM
From: russwinter	Read Replies (3) \| Respond to of 116555

Thanks for the review of urban Chinese residential real estate. For me, the key determinant of a Bubble is the following question, are people leveraging up, and spending beyond their incomes? In otherwords is behavior such that they are buying more than they can afford, and using cheap debt to do it? Another marker: are outsiders showing up and buying properties on speculation, and not using them, or use them "lightly". That's getting to be common throughout the US. Here in Oregon it manifests itself as so called owner occupied units, "used on the weekends", or more accurately, "used once in awhile". I doubt this even shows up in most vacancy reports. Is a property used 23 days a year vacant in China or the US? The Oregon Coast is rife with this, but the excuse there is that they are "vacation homes". But when you see the same thing happening in an upscale urban environment such as the Pearl District ($350k for "nice" 1000 sf condos and lofts that rent for $1300/mo, what's that about a 2.5% cap rate?) in Portland, what's the excuse, vacation homes? The answer is, leveraging up and speculation. So my inquiry goes right to the heart of behavior in China (or anywhere), how much of this is speculative leveraging up? The Arsenault-Rubino essay mostly dealt with commercial projects, and this is the key quote. If as Collier Intl (they ought to know) says the Beijing office vacancy rate is 25%, then you have a seriously overbuilt market, and a Bust likelihood, it's as simple as that, especially if the central planned govt is trying "to manage" (not doable) a "slow down": The common sense proposition that overbuilding leads to falling profits would, you’d think, make Chinese office vacancy rates a closely-watched, much-discussed number. Unfortunately, this isn’t a statistic that the government tracks at the moment, so private analysts are left to fend for themselves. The resulting estimates are all over the map, with some studies putting, for instance, Beijing’s vacancy rate at a benign 15%, while Colliers International, the well-respected global real estate firm, predicts 25% by year-end.