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Yes, In China right now there are a lot of real estate developers who are fly by
night
and johnny come lately. Their poor investors were paying monthly for their
residential
and office units for many months then they found out the developer, has so far
just
dig big holes and not even foundations yet. One reasons is the bank financing of
the developers didn't come though, so the speculators were left holding the bag.
Sometimes, me thinks its a good thing, they shoot criminals there regularly even
white collar crimes like massive frauds.
Michael Paauwe wrote:
> It is not a well known fact, but 1998 produced what is now considered
> possibly the most dramatic real estate bubble event noted in world history.
> It happened during 1997 and 1998 in Shanghai China, in the commercial office
> tower real estate sector.
>
> MASSIVE overbuilding of commercial real estate built during the high growth,
> over-inflated mainland China economy, resulted in hyper land speculation in
> Shanghai, which has ended in a commercial real estate CRASH of epic
> proportions. As quickly as many of the enormous new commercial office tower
> complexes are being completed, they are being pad-locked shut, sitting
> completely empty, whole towers across the horizon, with hundreds of
> thousands of square feet of high end commercial real estate sitting empty.
>
> It is now estimated that without ANY new commercial construction, it will
> take fully FIFTEEN YEARS of normal economic activity to totally occupy these
> new office tower complexes in Shanghai. This has resulted in spreading real
> property deflation and contributed to general price deflation in the area,
> admitted officially by the Chinese government today.
>
> The earlier post made on the Hong Kong economy is a partial result of the
> classic unwinding of the SHANGHAI real estate BUBBLE.
>
> As was pointed out in another recent post here, there is no real estate
> bubble in the US. But there is a true BUBBLE in the stock market. During the
> recent price peak, at the July 1998 market high, the price earnings ratio
> for the S&P 500 hit 29 times earnings for the market as a whole. This is BY
> FAR the highest US market PE Ratio ever recorded, and by a wide margin.
>
> What many analysts fail to mention is that it is not just the reduced
> earnings expectations that cause the stock prices to drop, it's the 'reduced
> price earnings ratios' that also result from reduced earnings expectations,
> that really start to kill inflated stock prices in a bear market. This is
> reflected in the recent S&P 500 futures prices, which have corrected exactly
> 10% from that July 20th high close, in only 11 trading days!
>
> On Acompora, he simply restated in plain language, based on market tape
> action, what Greenspan recently said about stock prices to Congress on July
> 10, 1998:
>
> "These rising expectations have, in turn, driven stock prices
> sharply higher and credit spreads lower, perhaps to levels
> that will be difficult to sustain unless economic conditions
> remain exceptionally favorable -- more so than might be
> anticipated from historical relationships."
>
> "Reduced prospects for the return to capital would not only
> affect investment directly but could also affect consumption
> as stock prices adjusted to a less optimistic view of
> earnings prospects."
>
> Michael Paauwe
> mpaauwe@xxxxxxxxxx
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