Matrix Blog

Posts Tagged ‘China’

Fraudulent Accounting Creates Jobs: Are We More Productive Or Not?

September 11, 2005 | 1:56 pm |
Source: NY Times

For the last 4 years, employment recovery has been weak. [NY Times]

The usual suspects have been: outsourcing, competition from China, high health care costs and lower work-force participation.

Daniel Gross‘ article has a different take using a research paper by the National Bureau of Economic Research: The Economics of Fraudulent Accounting “During periods of suspicious accounting (ie Enron, Worldcom, Adelphia, Halliburton, Arthur Anderson, Xerox, etc.) insiders sell their stocks, while misreporting firms hire and invest like the firms whose income they are trying to match. When they are caught, they shed labor and capital and improve their true productivity.” Removing the jobs lost from companies that restated their earnings would account for a large portion of total jobs lost. Enron was the poster-child for this sort of behavior.

So, what? How does this affect real estate?

Well, the Fed watches for employment patterns in its assessment of inflation risks. Inflation influences mortgage rates. For the past several years, productivity gains have been a plausible reason for limited gains in employment. Companies get more productive, then they need less employees. Now that theory is thrown a curve since a significant portion of the unemployment increase was from layoffs of firms that restated their earnings. Maybe things weren’t that bad?


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Earth to US: You Are Not Alone

August 31, 2005 | 11:14 pm |

[Seoul] raises property taxes to cool surging prices [Note: Reg.]

[Spanish] Housing loans up 26% in May amid ongoing boom

[South Africa] Property boom driving demand for materials

[UK] rate cuts could spark another housing boom

[New Zealand] Headed for Heartbreak?

[China] Concerns deepen over housing boom

[Iceland] Name Europe’s latest ‘tiger.’ Hint: look toward the Arctic Circle.

ideaworld

Is there a pattern here? It seems to me that there has been a lot of analysis on what the Fed will do to cool of the housing boom, but its apparent that many parts of the world are dealing with the same thing the US is at the same time. Australia and the UK just came out of their housing boom 2 years ago.

I would think that any solutions for a soft landing for the US real estate markets must come from internationally-orientated strategies.


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From Rubble to Rubles

August 16, 2005 | 10:07 pm | |

There is a housing boom in Russia where prices in an exclusive area of Moscow known as Ostozhenka, housing exceeds $10,000 per square meter. That translates to just under $1,000 per square foot. After New York, Moscow has the highest concentration of billionaires.

Mortgage financing is a relatively new concept in Russia and is helping fuel the boom. Lack of supply, is also fueling the boom, but as little as 6 months ago, the government was saying there was no housing boom.

Like Russia, China and Korea are seeing lack of supply and ready credit is very similar to the US situation. The housing boom pattern seems to be similar around the globe, however, the disparity between the entry and luxury segments as well as investor speculation in China, Korea and Russia are at a higher level than seen in the US.


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A Bear in a China Shop?

August 13, 2005 | 12:38 am |

Apparently, the Chinese government (The National Development and Reform Commission)was concerned about housing prices back in 2004 which rose 7.7% nationwide last year. In addition, values increased 25% over the period 1998 to 2003 with a 16% market share of investment properties.

The article also said that “The commission Tuesday also said the government’s housing supply is not as balanced because common commercial apartments are not available in large enough numbers, while there is an oversupply of luxury apartments and high-end villas.”

Is it just me, or does this sound familiar? But wait a minute…this is China…”oversupply of luxury apartments and high-end villas?”

Fast forward to the current real estate market in China…

Housing prices in 20 cities fall in July but the average nationwide increase in 70 cities increased 6.4% annually. China, like us has localized markets with different housing trends. 20 out of 70 cities saw falling prices, yet the overall average saw an increase.

Shanghai has observed soaring housing prices in recent years. Its commercial housing prices topped 5,118 yuan (US$617) per square metre last year, about 24.2 per cent or 1,000 yuan, up from the previous year.

Does that sound familiar?

Note: By my conversion calculations, Shanghai averages $6,641 per square foot! Please help me out on this…did I do the conversion correctly? Thats 30% higher than the highest sales in Manhattan on a per square foot (Rupert Murdoch’s $44M penthouse purchase was just north of $5,000 per square foot).


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Yuan Inflation?

August 8, 2005 | 10:06 am |

Inflation seen as key to Fed policy.

Tomorrow marks the likely 10th 1/4 point increase in the Federal Funds rate since June 2004 and with the jobs report showing growth, an increase seems almost certain.

The Chinese currency [Yuan] was recently strengthened by 2%, which could reek havoc with the housing market if allowed to float as much as 40% to which would be needed to benefit the manufacturing sector. The US would see a competitive advantage in manufacturing, allowing prices to increase, placing upward pressure on rates, tempering activity in the housing sector.

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