Greed and fear are the primary emotions driving China’s housing and auto markets today, as China’s lending bubble hits new heights.  For ordinary citizens, greed is the key driver:

Mr Wang’s story highlights the bubble mentality that has taken over the market.  As the Daily Telegraph married 4 of his clientss, 30-year old Mr Wang:

“Married, and then quickly divorced 4 women to allow them to circumvent strict property laws which seek to cool prices in China’s booming cities, and pocketed more than £8000 ($10k) from each transaction. Once the paperwork is put through, Wang applies for a divorce and puts himself on the market again”.

This is just the latest phase of a market craze, as I noted in November, when one Shenzhen resident told the South China Morning Post:

“The only thing I know is that buying property will not turn out to be a loss. From several thousand yuan a square metre to more than 100,000 yuan. Did it ever fall? Nope.”  He and his wife got divorced in February, in order to buy a 4th apartment in Shanghai for 3.6m yuan (US$530k) on the basis that “ If we don’t buy this apartment, we’ll miss the chance to get rich.”

A collective delusion has swept China’s Tier 1 cities, just as happened in the USA during the sub-prime bubble. Amazingly, China’s property bubble is even larger than sub-prime. Unremarkable pieces of land in Shanghai are now being sold at $2000/sq foot ($21500/sq metre), nearly 3 times the average land price in Manhattan, New York.

It is understandable in some ways, as Chinese buyers have never known a downturn, as I noted in September:

“It is also easy to forget that housing was all state-owned until 1998, and still is in most rural areas.  Urban housing was built and allocated by the state – and there wasn’t even a word for “mortgage” in the Chinese language.  Not only have home-buyers never lived through a major house price collapse, they have also had few other places to invest their money”.