The $7 Trillion Chinese Mortgage Market Is Imploding.
Why does this matter, and how can you structure your portfolio?
It all started with Evergrande, China’s largest property developer.
Their series of debt troubles was the bellwether for a distressed housing market, and now the entire Chinese real estate market is on the brink of collapse.
Unfinished properties were sold en masse to Chinese buyers from now-defunct real estate developers.
$297 BILLION WORTH of these mortgages are being boycotted – with additional protests erupting across the country. This is 4.2% of the total Chinese Mortgage Market.
With Chinese real estate speculated to be the largest asset class in the world, the knock-on effects of a meltdown would have consequences for the global economy.
Deteriorating People’s Bank of China (PBoC) liquidity slows world business activity.
Stay tuned and watch the entire video for all of the details!
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⏰ Timestamps ⏰:
0:00 – Intro
0:22 – Chinese Mortgage Boycott
1:40 – Will Evergrande Collapse?
3:51 – Chinese Liquidity Moves The World
4:58 – Second Lowest GDP Growth
6:39 – How Can You Benefit?
8:31 – My Thoughts.
11:27 – LIVE CALL International Analyst
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Hey everybody welcome back to whiteboard Finance my name is marco and i’m here to Help you master your money and build Your wealth in today’s video we’re going To be talking about the seven trillion Dollar china real estate bubble that’s Brewing since pretty much last year but It’s actually starting to intensify this Is a presentation that me and my Research analyst joe consorti put Together if you don’t follow joe check Him out on twitter so what is going on Right now so chinese people are refusing To pay mortgages so essentially it’s Common for homeowners in china to start Making mortgage payments on new Properties before they’re even finished These are basically payments funding the Construction almost like in the united States how we have construction loans For builders and those funds are Typically released in phases throughout The project however Many projects are facing delays in china So what we’re seeing is unfinished Projects sold by defunct real estate Developers or people that are actually Going under potential um you know Default we’ve seen that with evergrand Which we’ll get into later in this Presentation uh so you can see in this Slide here these are the top five Provinces where they’re having these Boycotts on these loans and it’s
Actually springing up all across uh Eastern china uh the bigger the bubble The more projects affected the biggest One is 40. uh the second biggest one is 10 and you can see all the smaller ones Sprinkled throughout so this actually Equated to about 10 of properties sold Last year with a nominal amount as much As 297 billion dollars on 300 plus Protests in 90 different cities so to Put this into perspective the chinese Mortgage market is worth 7 trillion Dollars the boycott is on basically 4.2 Percent of it So let’s take a look at one of these Specific developers this is actually Evergrand if you guys remember a lot of People were doing videos on the Evergrand potential collapse this was Maybe like six to eight months ago even Though this has been brewing for over a Year now easily so this is the big Property crisis evergrant is actually One of the largest chinese property Developers i believe it is the largest Property developer in china they have 300 billion dollars in debt uh so right Now they’re actually dodging outright Default but they are missing payments And inching closer to it um and the Collapse of these developers could Actually lead to a loss of 250 million Chinese jobs okay that would be huge and We’re going to get into why that’s
Important for us you may be thinking you Know hey marco i’m you know halfway Across the world the united states or in Europe or you know wherever you’re Watching this from but this will affect You and i’ll show you why So this is why ever grand crisis could Be worse than the great financial crisis In the united states in 2008 so Typically these developers Actually real estate residential real Estate makes up 30 percent of china’s Gdp okay this is absolutely huge the Chinese property market is likely the Largest asset class in the world so if We take a look at this chart you can see That this dark blue bar right here is Residential property You can see that the medium blue is Fixed income which are typically bonds Annuities things like that And then light blue is equities these Are stocks now look at that compared to The united states united states dark Blue is right here which is residential Property fixed income is actually the Largest market and then we have equities Which are stocks right here you can Compare that to japan uk and australia However this boycott contingent is Spreading for home buyers to suppliers So it’s not just the people that are Buying the homes and the developers that Have so much leverage right now it’s
Actually spreading to the suppliers you Can see here some suppliers the chinese Real estate developers are now also Refusing to repay bank loans because of Unpaid bills owed to them this is a sign That the loan boycott that started with Home buyers is now starting to spread And the source of this is goldman sachs So why does this matter so if you look At chinese liquidity it actually moves Global markets and global economies Everything is made in china you guys the United states doesn’t really make Anything anymore we are a service Economy Yes we can create things with engineers From overseas That become u.s citizens but things are Typically made in china your iphone is Made in china yes it was designed in California but it’s made in china okay So the world business cycle this line is In orange and then you can see the Chinese china policy liquidity index is In blue and you can see how they’re Somewhat starting to be tighter Correlated Later on basically since 2010 and on if You look at it before i’m not really Seeing a huge correlation there to be Quite honest some of it is there but It’s getting tighter and tighter as time Goes on so as long as the people’s bank Of china liquidity deteriorates we’re
Going to see a slowdown in world Business activity a chinese real estate Collapse would affect the entire world And chinese construction and home sales Are 25 to 30 percent of gdp as we Established earlier So let’s take a look at this situation And why it’s quickly deteriorating so This is because of lockdowns is what We’re guessing if you take a look at This i should have put a little corona Bottle right here you know the cerveza That i always talk about if you still Haven’t gotten that joke yet I i don’t know what to tell you maybe It’s not that good of a joke It’s not even a joke i just can’t say it Because of youtube but anyway we’re Looking at the second lowest real gdp Growth ever uh since 2000 okay so this Is going back all the way to 2000 uh This is china real quarterly gdp annual Year-over-year percentage change uh They’ve had steady growth all since the Early 2000s uh 2008 affected everybody That was a pretty much a world global Crisis And then it’s gone down down down down Down uh cerveza exploded back up and now We are back down at just 0.4 percent Increase in gdp uh year over year so What does this cause this caused wealthy Residents trying to flee taking their Wealth with them this is no different
Than what’s happening in russia and Ukraine uh if you take if you know Anything about the vancouver real estate Market It’s a lot of chinese money in there That’s why home prices are are Absolutely uh inflated same thing with Toronto same thing with new york city Same thing with australia a lot of this Money is leaving their shores so this Foreign outflow from the chinese Government bonds hits a record in june And what is happening now is these banks Are actually making a proposal or excuse Me um government’s making a proposal for Banks to forfeit their 4.6 billion In mortgage interest income which will Affect these chinese banks So how can you position yourself as Always i try to create a scenario where You benefit from these things that’s the Whole point of watching my channel um You may i’m not a proponent of this i’m Not a proponent of chinese equities at All to be quite honest with you but if You want to go into this arena common Sense would tell you to watch chinese Bank stocks so the average exposure to Property including mortgages is 17 Across chinese banks i believe this is According to goldman sachs And then there’s a potential opportunity There so you may want to take a look at That again i don’t touch chinese stocks
With a 10-foot poll just because of Their accounting Practices and things like that if you Want a brief history of that take a look At uh alibaba take a look at luck in Coffee or lucan coffee however you want To pronounce it Just google those two Companies so anyway number two is reit Fire sale may be coming soon uh so if You guys remember like the greek debt Crisis that affected the entire um the Entire stock market that was in the Early mid 2000s China blowing up the real estate market Could be a potential opportunity for the United states real estate market to be Cheap as well What we’re talking about is not Necessarily residential but it could be Reits so real estate investment trusts At a discount Again i don’t know if it’ll affect it That much i think we’re in an overall Everything bubble which i’ve made videos About But you may want to take a look at reits As well Number three is accelerate china’s shift Away from the us dollar If you guys you know have had your head In the sand over the past two three Years uh what we see the bric countries Doing brazil russia india china
South africa you know argentina even is Trying to get into the bricks now They’re searching for a safe haven Backstop to the u.s dollar and the Petrodollar system bric nations may Accelerate their switch over from the Dollar standard and the dollar being a Global reserve currency okay so let’s Get into my thoughts on this so i worked In commercial real estate i worked for a Boutique real estate development firm we Owned about 750 000 square feet of Office space and a couple other Different property types and also a Couple hundred units of multi-family i Worked in commercial real estate lending I have experience in commercial real Estate in the united states uh do i have Those connections in china no i’ve never I’ve never developed anything in china i Don’t know anybody that works in real Estate in china so the reason i say that Is because i can only tell you what i Would do as an american person uh what May potentially cause harm to my Portfolio because of what’s going on in China so the example that i would give You which i mentioned about a minute ago Is the greek debt crisis that affected Everyone’s portfolio because everything Is financialized so what when greece Defaulted on their debt that affected Global financial markets just like 2008 When america had their great financial
Crisis that affected global markets Because everything was Financialized together so you had Foreign nations pension funds buying dog Crap products in 2008 from investment Banks like goldman sachs you know lehman Brothers et cetera et cetera so it Caused the whole thing to crash This is probably more china specific but It may be a greek debt crisis moment is What i’m trying to say so what do you do You diversify you can diversify into Many different things some people say Diversification is diversification I don’t believe that because i enjoy Looking at my net worth as a pie my Slices are just different assets of Different uh things it could be crypto It could be bitcoin it could be real Estate it could be bonds it could be Stocks it could be whatever number two Is what do you think is causing these Delays is this a global you know Logistics problem which we’ve been Seeing in the automotive market uh is it Supplies is it too much debt is it Beijing telling hey developers you can’t Be so over leveraged as you have been For the past you know 15 20 years that’s Going to have to come to a halt at some Point because that that is what’s Happening right now What do you think is causing this is it Cerveza is it global supply chain is it
Government action you know what do you Think is causing this so i’ll leave you Uh with that question on mind please Answer down in the comments below I’m excited to say that my school Whiteboard finance university is almost Done i’m in the process of hiring Professors for each subject matter we’re Going to be talking about real estate Macro digital assets such as bitcoin and Crypto we’re going to be talking about Stocks we’re talking about options Dividend stocks etfs index funds pretty Much the whole gamut on how to help you Become wealthy so if you want to sign up For the waiting list check out the link In the description below again that is My school called whiteboard finance University you’ll be getting access to Me everything i’m buying selling live Streams q a all that good stuff uh if You enjoyed this presentation give my uh Research analyst joe consorti a follow It’s at joe consortia twitter and as Always have a prosperous Let’s see what my wife has to say about Chinese real estate Hello Hey can you hear me I can hello What what are your thoughts on the Chinese real estate bubble Chinese real estate bubble hmm i have no Idea
I know nothing about it What do you think it is Um i have a feeling that real estate In china has significantly increased as Well increased Yes okay that’s a good guess What do you think is causing this bubble Um Uh inflation Could be could be Well what’s really happening is is that People are pre-paying mortgages or Starting to pay mortgages on property That isn’t built yet but the delays are Really really really long And people are starting to boycott it And saying hey i’m not paying these Mortgages anymore I don’t blame them Yeah what would you do if your house was Under construction and it took forever And you’re paying your mortgage already I would say hey i’m not paying my Mortgage because i ain’t living in the House yet that’s right buddy That’s right buddy All right thank you for your insight No problem goodbye wayport finance okay Bye beeps bye bye Okay you heard it there first from our International correspondent my wife You