Real Estate Crisis in China
Real Estate Crisis in China
I'll compile some data about the events in China but ultimately it becomes a question about the meaning of "crisis".
Vague market description are a problem for prediction markets. Creators sometimes struggle:
I am intentionally vague with my definition of crisis, but here are some things that would cause me to resolve this as YES
This market has quite some traders and liquidity, so it seem noteworthy enough to take closer look.
The market was created in September 2023, so anything before that is apparently not sufficient for the creator to declare it a real estate crisis. The creator stated a few tentative resolution criteria and we can look at these more closely.
Multiple reputable publications (e.g. Reuters, Bloomberg, Al Jazeera) writing about a construction crash, housing bubble popping, etc. Not about impending danger, but about currently ongoing stuff.
I found none of them calling it a “crash” or “bubble popping”. Instead there are phrases like “decline in China's property sector”.
Wikipedia describes it as an “ongoing crisis”.
Multiple large companies like Evergrande declaring bankruptcy
In August 2021, Evergrande filed for US bankruptcy. Since then no other company has done the same in this context.
Country Garden failed to pay in February and a court hearing is scheduled for May.
Further names to watch out for are: Poly Real Estate Group, Vanke, Sunac China Holdings, Longfor Properties, Seazen Holdings, China Resources Land, China Overseas Land & Investment Ltd., and R&F Group.
Municipal governments defaulting on bonds
Apparently, selling land to real estate developers is an important revenue for municipal governments. This is why they might be the next to fall, if the large companies fall. That hasn’t happened yet though.
Sudden drop in stock value in the sector, of at least 30% sustained over a week or more
The equivalent to the S&P 500 in China is the CSI 300. There is a Real Estate subindex. That seems to be the most suitable thing for “stock value in the sector”.
I don’t know what the market creator has in mind with “sudden drop”. Something like the collapse in September 2008 with the Subprime Mortage Crisis, I guess.
That month was movie material. Multiple movies even.
Large drop in real estate value
Is that a large drop? It is larger than any other in the data FRED has (i.e. nothing before 2006).
Large drop in new units being built
Construction certainly slowed down a lot. The actual severity of it depends more on how quickly China will recover. The IMF apparently believes that it will take a while.
So what should we conclude for the Manifold market?
I would say, there definitely is a “crisis” but we have not observed a “crash”. Some conditions are fulfilled and some are not.
The Subprime mortage crisis according to Wikipedia “occurred between 2007 and 2010”. The sudden crash happened in September 2008. Also, there is a climate crisis but no climate crash yet.
Since the question is not resolved yet, I guess the creator needs a “crash” for a YES even if there already is a “crisis”.
I find myself struggling to find interesting topics lately. Would you be so kind to give me some suggestions?
Trump or Biden? The Stock Market Doesn’t Care. It seems even a US president has little influence on the stock market and the economy.
Probably until next week, housed readers! 😊