Imagine creating an economic system where basic necessities becoming more affordable is considered a crisis. And then gaslighting everyone into thinking this system is so perfect and wonderful and there’s no way it could ever be better.
The problem with falling house prices is for the people who recently purchased. Imagine buying a home for $500k and 1 year later you still owe $475k on it and it’s only worth $450k.
Eventually people say fuck it, and declare bankruptcy to get over an upside down mortgage.
If enough people do that then the banks fail. If enough banks fail then there’s cascading effects across the economy which can lead to mass layoffs, failing businesses, and other crises.
If collapse is what you want then yeah let then fall. But there’s a lot more pain in collapse than you realize.
I think you’re misunderstanding what I’m saying—which, to be fair, I didn’t articulate in much detail.
I understand why it’s a problem under capitalism. But that’s sort of the whole point I’m making. We’ve created an economic system with all of these perverse incentives. We need to create an economic system where living can become more affordable for people without causing economic chaos, and where we aren’t held hostage to the economic interests of the extremely rich.
What if we had an economy that thrived when food and shelter become cheaper? What if the economic pain was inflicted on the well-off when the poorer in society started doing worse, instead of the other way around? If we could engineer such a system, our leaders would make much different decisions, I think.
What would happen if the state bailed out the people instead of the banks?
You’re talking about China, right?
Basically every nation unfortunately.
In a true communist system, isn’t the idea, that homes should be free? Dropping prices seems like a step in that direction for them
But alas, China isn’t a true communist country. Just like many socialist country, their economy still relies on capitalism, and this issue is much more complex than say housing should be free, because the issue they’re facing right now is there’s way too many supply and there’s not enough demand(or simply unaffordable).
Housing price falling might be a good news for people who’s looking to buy one as their forever home, but beyond that, it will make upper-middle class and upper class people spending less as the mortgage they’re paying doesn’t match the housing price in the current market, which could have a cascading effect toward the economy as a whole. Another issue is, when the demand is too low and the housing development company stop their project, ten(or even hundred) of thousands of blue collar will also affected. Now suddenly a “good news” doesn’t sound as good as it is. The article explain it better.
And i’m not even talking about the multimillionaires that can escape when they want to.
People forget that China is communistic in social policies so low new home prices so that people can afford homes is good, even at the lower profits for the developers.
You could say that China is anti-oligarchy.
They fall because no one can afford them because they have huge unemployment problems
China has a homeownership rate somehwere between 90% and 96%. Cope harder.
Just that what a lot of people here would consider a home isn’t what a lot of Chinese people have. And the middle class is sometimes in way over their head for housing, with apartments going for insane prices even for Western standards.
https://www.sueddeutsche.de/wirtschaft/fotoserie-ueber-hab-und-gut-von-familien-china-wie-es-wirklich-lebt-1.2513551 for photos how a large part of the Chinese live, the photographer is Chinese himself.
The issue for China isn’t that nobody owns a home, but rather that the young and bright can’t afford one that’s up to modern standards, an issue shared with the West.
insane prices even for Western standards.
Where? Shanghai and Beijing are expensive by chinese standards, but you can rent a mansion for the price of a suburban shitbox in America. And the rest of China is even cheaper.
Renting is quite cheap in China because property investors traditionally don’t expect a ROI from rent, but from sale.
Absolute numbers I could find from last year:
As of August 2024, prices for new homes across 100 cities in China averaged 16,461 RMB per square meter, or about $2,318.50.
In the United States, the average price per square foot is around $233, according to May 2024 data from the Federal Reserve Bank of St. Louis. This equates to $2,508.01 per square meter.
This with a lower average income in China; it’s usually less than 1500 USD/month after conversion.
That adds up. Rent is hilariously low, idk why anyone would buy when your mortgage is going to be double rent.
Given the tendency of the chinese stock market towards low growth, I kinda understand why randos would tend towards land despite returns nearly as bad as Japan.
