The day has finally come, though with a debt of 14 Trillion you could have expected folks to sort of agree, to telling the US “dude you gotta stop lending and get your finances straight!”.
S&P cut the U.S. Rating from Triple A (AAA) to AA+ with the outlook negative (you’re not helping!).
Markets are down already on the realization that this inflation, central bank powered recovery is running out of steam, so, I’m quite keen to see monday.
Oh dear, this time, really, this time I won’t panic and sell it all too! I’ll be strong, and I’ll buy on the way down.
Wait, no, maybe I’ll panic.
Now, there is a way to cope with the rising real estate prices in China!
Become a Tencent (the guys behind QQ, QQ games, those funny card games you see your chinese colleagues play online, paipai.com and others) employee!
Tencent is offering interest free loans to employees that have been with the company for longer than 3 years, and it said to keep 1 Billion RMB on the side to just do this.
Employees will be able to borrow up to 300′000 Rmb per person.
China has been raising interest rates, and pushed up bank reserve minimums in the past months, to make it more difficult and less attractive to buy property in a try to slow this red hot market a little bit.
So far, with little success, as the appetite for property seems to only grow stronger and credit can be acquired for the right price anywhere.
After several years of rising mortage interest rates china has now decreased the cost of money to homebuyers.
The general 1 year interest rate has fallen to 7.20% from 7.47%.
More Relevant to most homebuyers the rate of a 5 Year or longer loan has fallen to 7.74%, but that’s only a little change from the 7.83% before.
Will this be enough to lift the transaction slum the Real Estate Industry has been in the last 3 months?
Shanghai’s Transaction volume is near Zero in most parts of the city, it’s a dead market, no buyers, no sellers.
Our Office is a little like a gathering place for many top agents from many of the big companies.
Nowadays nearly 20 people gather outside our shop and discuss various things from housing to the latest movie.
All of a sudden everybody has a lot of time on their hands.
Don’t get me wrong, there are still deals being done, and especially in this circle of Agents dealing with luxury properties we almost daily get new prospects who are in the market to buy a house.
(But our Company deals mainly with historic properties for which the rule of high demand and low supply is still in tact.)
What is interesting too is that besides a few desperate sellers there hasn’t been a lot of homeowners that are willing to take a loss yet.|
Most people, even in this market clinch on to their original asking price and are, at least right now, reluctant to negotiate lower prices for their homes.|It reminds me a little of some of my friends who lost 2/3 of their money in chinese stocks.
Everybody I know of that lost this much still has the stocks, they didn’t sell, and their holding on.
In Chinese mentality you can only sell on a profit.
There even is a proverb: Feel free to make any deal, but never do unprofitable one’s.
In my opinion, the interest rate decline, will at the most, ease the pain of the monthly payments many landlords have currently.
Below is a graph I created with the last 10 Year Interest Rate movement for chinese house mortgages.