China housing/real estate crisis by Sep 2024? (1000M subsidy)
Sep 27

Related to the news around Evergrande:

Many, many analysts have predicted the impending doom of China wrt to building ghost cities, unsustainable infrastructure spending, municipal governments taking on huge loans, and an inevitable bubble.

There are plenty of articles arguing so:

If and when this will happen is a very important question, with widespread consequences and plenty of opportunity to cash in on accurate forecasting.

The question is: will there be a crisis in China in the real estate/housing/construction sector in the next year?

  • By 27th September 2024

  • If the crisis is very transient, similar to Covid in US, and everything is back to business as usual by the deadline, it's still counts as "YES"

  • If the Chinese governemnt takes on insanely huge loans, but prevents the crisis, that does not count as "YES"

I am intentionally vague with my definition of crisis, but here are some things that would cause me to resolve this as YES:

  • 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.

  • multiple large companies like Evergrande declaring bankruptcy

  • municipal governments defaulting on bonds

  • sudden drop in stock value in the sector, of at least 30% sustained over a week or more

  • large drop in real estate value

  • large drop in new units being built

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I wrote a whole blog post on this market. Might want to read it. ;) @PeterBuyukliev

@marktwse Hey, I was inactive and somehow missed your comment.

Very good research! I'll definitely lean on that, come resolution time.

And yes, definitely for this market navigating the resolution criteria is just as difficult as forecasting itself. I thought about different options, but there is no good way to define housing crisis/bubble popping - clear cut and objective. Or at least I couldn't figure it out. I should have addressed developments that were already happening, though.

Nonetheless, it is an important question to try to forecast, even if it's hard to be objective. Literally billions of dollars are on the line.

I hoped for more activity here, even arbitrage with different real-money options.

@marktwse also, regarding what is a sufficient stock index drop, I addressed this in a comment below:

50% drop in new units being built in a given quarter, year over year comparison

30% drop in real estate indices (sustained for more than a few days)

There is already a large drop in new units being built.

@JimAusman any specific source/statistics?

It is quite likely to see these two things happen:

  • large drop in new units being built

  • large drop in real estate value

Can you define large?

i think what will very likely happen is the real estate becomes cold in china, but the general economy remain unaffected.


I didn't give precise definitions intentionally, this is really vague and I wanted to leave myself sufficient flexibility. Note that I don't hold any stock in this market.

However, I feel the following numbers are fair:

  • 50% drop in new units being built in a given quarter, year over year comparison

  • 30% drop in real estate indices (sustained for more than a few days)

bought Ṁ10 of YES


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