More on the Asian Housing Crisis: Why Putting an Exact Date for a Possible Crash is Not a Good Idea


Talk of a possible real estate crash in China is a hot topic since the popular investigative news 60 minutes featured an  episode about China’s ghost cities.  As the title implies, the episode’s message is loud and clear: China could be in a big housing trouble sooner rather than later.

(This is the clip from 60 Minutes)

The go-to guy for Asian bubble local insight — as he seems to be in almost all of China’s bubble news — is Gillem Tulloch,  a vast resource of refreshing Asian economic insight.  He is the founder and Managing Director of Forensic Asia, an independent research company that operates a highly forensic accounting approach to Asian companies.

One thing I disagree with Mr. Tulloch, though, is his specific time he put forth on when the China’s property bubble will burst: Second Quarter of this year.  Now, I have no doubt that China’s bubble may burst in the coming months.  But if it doesn’t — if the property bubble somehow, for reasons unknown, sidesteps the decline for another few months or even a year or two — then it’s easier for people sitting on the fence waiting for the bubble to pop to re-take their own feel-good medicine that everything will be OK after all.  I’ve seen that happen a year or two before Nevada’s housing market popped.  Too many observers were calling specific timelines for the burst to happen, and when it didn’t, emboldened onlookers jumped with more vigor than ever.

Related: Australia: The Housing Bubble You Haven’t Heard of (Yet)

Unknown Factors

There’s too many unknown variables to put a specific timeline on a property crash. But Like Mr. Tulloch, I believe the Chinese housing market is ripe for a steep decline.  I also believe China’s housing decline can be a trigger for a financial contagion to spread across Asia’s smaller economies.

Last December I wrote about South East Asia’s pending housing crisis in the form of an open letter to the President of the Philippines.  Since then there has been no shortage of news to reignite the debate — on both sides.  Yes, we’ve been seeing 60 minutes and other mainstream news talk about China’s bubble.  But the other side hasn’t had a shortage of rosy developments: Philippine’s upgrade to investment grade from Fitch Ratings, Blackstone private equity group’s confidence-boosting plans to invest an unprecedented $5 billion in Asian real estate and firm rebuttals of China’s ghost cities.

So what to do? May I suggest a continued pursuit of truth in the name of intellectual honesty. It’s worth the risk to ask tough questions; to probe resurfacing evidence. Ultimately,  it’s not about who is right or waiting to prove someone wrong. As I wrote about my piece on the Philippine’s housing bubble, it is the family who ultimately loses when an unexpected crisis hits.

And there are few times in my life where I hope what I’ve presumed is proven false.

Photo: @yakobusan Jakob Montrasio ???

About Author

Fascinated with business models more than super models. Joe is a real estate blogger from Northern NV (based in Reno) stalking the Reno- Lake Tahoe Real Estate market since 2007. He is most at ease (and peaceful) when at home spending time with his beautiful wife Anna and their two kids. (And watching the 2011 2013 NBA Playoffs.)


  1. Brandon,

    First time I saw that video my mouth was hanging wide open. It was weird and surreal to see those miles and miles of empty houses and commercial buildings.. According to Tulloch, the reason why China has kept the bubble from exploding is they’re pumping “ridiculous amount of cash” into the economy, esp. housing market.

    I think this is a groundbreaking moment. We’ve never seen anything like this,– in magnitude. It’s really interesting how this is going to play out in the next 2 years, esp after U.S. recovery–how will that affect investor’s confidence in the east.

  2. Eric,

    30%. And to think that at the peak of the U.S. housing bubble, we were at 8% (real estate impact on the U.S. economy) — which was considered insane at that time. But at 30% I can only wonder how much Chinese Government bailout money is needed to plug the hole if it indeed bursts wide open.

  3. Wise words of caution there, Joe, and well-written too, thank you.

    Personally, I’d be wary of predicting not even exact dates, but even generally crashes and burns in any country – these are relative, subjective terms in any case – what’s a “burn” or “crash” or “bubble pop” and how is it distinguishable from a normal “cooling down” or “downturn”?

    We’ve been seeing Australia reach unsustainable heights, along with Singapore and Hong-Kong (probably the world’s worst bubble at the moment) – having just returned from HK, the gap is felt strongly in the differences in price between “living” (catching the ferry, eating out, shopping for basics) and owning property (even the world’s richest are struggling to purchase there, and there’s no way the average citizen could ever afford a home in their lifetimes).

    China and Singapore however, as opposed to HK, have both successfully implemented cooling measures in the recent past (see here – – the government in China, additionally, has been acting surprisingly sane since the feared exchange at the top of the party – I wouldn’t count on them bubbling out all that quickly. They’re also very creative with their income generation tactics. Theme parks, resorts, “ghost towns” one day that turn into bustling shopping/manufacturing/industrial areas the next – they’ve still got more than a few tricks up their sleeves.

  4. Hey Ziv,

    Nice to read your thoughts here. Only thing I would disagree is I think it’s premature to say that China and HK have been successful in cooling their economies, precisely because of their “income generation tactics” — injecting “ridiculous amounts of money” into their economy. Estimates have real estate as 13% of their GDP. (At it’s peak, U.S was at 6%). And there have been few, if any, historical archetype of a country successfully cooling their economy — esp. at this magnitude.

    I would say this: if there is a country who could be “first” in saving themselves from a real estate collapse, China — with all it’s trillions in its coffers, and economic influence of the government — could be in the best position to pull it off.

    “….they’ve still got more than a few tricks up their sleeves.”.

Leave A Reply

Pair a profile with your post!

Create a Free Account


Log In Here