Chinese Housing Bubble: Will These Stocks Survive If It Bursts?

Chinese Housing Bubble: Will These Stocks Survive If It Bursts?

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Some analysts are arguing the one-child policy might be causing a Chinese housing bubble. 

Chinese housing prices are going through the roof, and have been since 2010. They rose 7.5% in August, after going up about that much in the month before. By some metrics, the rate of increase seems to be getting faster – August saw home prices increase in 66 of the 70 cities surveyed - as opposed to 62 in July.

Rent is more expensive in some parts of Beijing than in Washington DC, despite having a median income of only $800 a month (Meanwhile DC residents were earning about five times that in 2011).

Read more from Kapitall Wire on China: Chinese Consumers Are Hungry for More and These Stocks Are Feeding Them

Whether this growth is sustainable is another issue. On one side detractors point to a housing bubble which they compare to our own in the United States. However, the cases don't really match up. Financial regulation is much stricter in China, and they don't have REITs or the kinds of mortgage-backed securities which abounded in the US before 2009. China also has much stricter capital requirements for taking out a loan.

Potential homeowners in China must put down at least 20% of the principal before they can get a mortgage. With these rules in place, it's much less likely that a comparable number of Chinese will be sent into default – which can trigger the kind of bank failures we saw here. 

And yet, there are bears on Chinese housing that point to one very tricky side effect of the one-child law. Some argue that one of the biggest downsides of the controversial policy is only beginning to be noticed. People are buying lots of houses – and leaving them to only one kid. When this new generation comes of age, they're going to inherit more homes than they could ever need.   

Why does this matter? According to Quartz, it's all about competition in the marriage market. With too few women to go around, finding a partner in China is getting more difficult and more expensive. Match-making services have already become increasingly commonplace, one firm, So Klose, was even honored at the Chinese Enterprise Credibility Summit in May. And these match-makers have been encouraging families to buy extra homes, or at the very least expanding their existing ones in order to attract female partners from a shrinking dating pool.

Some are arguing that this phenomenon, already problematic in the gender imbalance it fostered, is also creating an artificial demand for homes. Which leaves China with an awkward choice they may potentially have to make: maintain their favorite interventionist program, or their favorite cash-cow industry? One of them may have to go. 

And how will this affect the lucrative Chinese housing market at large? We found five US-traded stocks operating in this space.

Click on the interactive chart below to see data over time. 

Is China's lucrative housing industry in trouble? Or will it continue to grow, albeit at slower rates? Use the interactive list below to begin your own analysis. 

1. Xinyuan Real Estate Co., Ltd. (XIN, Earnings, Analysts, Financials): Engages in residential real estate development in China. Market cap at $213.41M, most recent closing price at $6.08.
 

 

2. China Housing and Land Development, Inc. (CHLN, Earnings, Analysts, Financials): Is engaged in the acquisition, development, management, and sale of multi-family residential and commercial real estate properties. Market cap at $95.09M, most recent closing price at $2.62.
 

 

3. IFM Investments Ltd. (CTC, Earnings, Analysts, Financials): Through its subsidiaries, provides real estate services in China. Market cap at $31.01M, most recent close at $2.01.
 

 

4. China HGS Real Estate Inc. (HGSH, Earnings, Analysts, Financials): Engages in the real estate development in the People's Republic of China. Market cap at $343.28M, most recent closing price at $7.62.
 

 

5. China Ceramics Co., Ltd. (CCCL, Earnings, Analysts, Financials): Engages in the manufacture and sale of ceramic tiles used for exterior siding, interior flooring, and design in residential and commercial buildings primarily in the People's Republic of China. Market cap at $58.02M, most recent closing price at $2.90.

 

 

(List compiled by James Dennin. Yearly returns sourced from Zacks Investment Research, quotes sourced from Yahoo! Finance. All other data sourced from Finviz.)

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4 Responses to “Chinese Housing Bubble: Will These Stocks Survive If It Bursts?”

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  2. It is good news for real estate buyer or seller after the economical crises the real estate market condition are grow up rapidly at now the best opportunity to invest in real estate as compare to past year 2012 this year 2013 Real estate sales and activity are increases.

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  4. Kamagra says:

    these match-makers have been encouraging families to buy extra homes, or at the very least expanding their existing ones in order to attract female partners from a shrinking dating pool

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