CHINATHE HOUSING BUBBLE

CURT TRUMAN B.S., M.P.A.Masters of Sustainable Solutions

Arizona State UniversitySchool of Sustainability

CURTTRUMAN@ASU.EDU

China is 4 times the population of the U.S.A

Population:319 Million

Populaiton:1.390 Billion

Population (2014): 1.39 billion

Urban populationwill reach one billion by 2030

Over 700,000,000 people live in urban areas - That's half the population

Population Growth (2014 estimate): 0.44%

By the year 2050 over 70% of all Chinese will live in Urban Areas.

China has 34 provincial-level administrative units:

23 provinces,

4 municipalities (Beijing, Tianjin, Shanghai, Chongqing),

5 autonomous regions (Guangxi, Inner Mongolia, Tibet, Ningxia, Xinjiang)

and 2 special administrative regions (Hong Kong, Macau).

WHAT IS A REAL ESTATE BUBBLE ?

Characterized by rising prices of land and real estate until the price increase becomes unsustainable

The market reacts when housing prices take a dramatic fall - The Market Crashes

There is to much housing inventory and no Buyers because prices are to high

China has over 64 million vacant apartment units

With a 4 to 7 year supply of housing inventory

THE HOUSING BUBBLE IN CHINA

AS PART OF CHINA'S STIMULUS APPROACH DID A HARROD-DOMAR ECONOMIC MODEL TRIGGER AGGRESSIVE REAL ESTATE DEVELOPMENT IN CHINA?

WITH MASSIVE SAVING AVAILABLE FOR INVESTMENT WAS A LOOSE MONETARY POLICY RESPONSBLE FOR SUCH MASSIVE OVER BUILDING?

Research Question:

China's Housing Inventory is 64 million vacant units = The populations of California and Texas combined!

GROWTH THEORIESTHE HARROD DOMAR GROWTH MODEL

SAVINGS TO INVESTMENTSTIMULUS PLANS

INDICATORSGDP AND THE PERCENT OF REAL ESTATE GROWTH

SAVINGS RATES CHINA'S HOUSING INVENTORY

CHINA'S SAVINGS RATE IS 50%

THE US'S SAVINGS RATE IS 5%

CHINA'S PRODUCTION EXCEEDS IT'S SPENDING

THE U.S. SPENDS MORE THAN IT PRODUCES

The U.S. IS A NATION OF CONSUMPTIVE CONSUMERS

(BLACK FRIDAY?)

Click to add text

CHINA'S SAVING AND INVESTMENT RATES

HOW TO MEASURE THE BUBBLE

HOW DID IT HAPPEN?

THE CENTRAL GOVERNMENT DEVELOPED A LOOSE MONETARY POLICY

WHICH FULLED INCREASE BORROWIG BY LOCAL GOVERNMENTS, DEVELOPER/BUILDERS AND INDUSTRIAL COMPANIES

The Chinese Government thought that a stimulus program was a good idea to kick-start the economy and trigger investment and growth

The rise in Real Estate prices was triggered by the credit infusion of 2009 to enhance economic growth amidst the U.S. Financial Crisis

So in Theory it was the Harrod-Domar Model at work

CHINA'S GDP v U.S.

THE IMPACT OF THE HOUSING CRISIS.....

China became the wild west of speculative borrowing and building

Housing Bubble took an unsustainable turn and left millions of Chinese citizens vulnerable

It ignored simple land ethics; citizen's ability to adapt to rapid expansion

the relationship between man and the environment

low-income rice farmers and their fields

It forced millions of Chinese to jump between adaptation and transformation strategies

The Housing Boom as part of the Stimulus Plan

Urbanization and Migration

Over 70 percent of Chinese are expected to be living in cities by 2050, compared to less than half

in 2005. advantages.

TO BE CONTINUE .....