The Capital Cycle Podcast Chinese Property Opportunity
23 snips
Aug 29, 2025 Kai Chen, an Emerging Markets Analyst at Marathon Asset Management, shares insights on China's evolving real estate landscape. He discusses the drastic changes driven by government policies aimed at reducing overleveraging and how these have affected home prices and developers. Chen draws parallels with historic downturns in Japan and the U.S., highlighting resilience factors and crucial market dynamics. He also illuminates the issue of overbuilding in lower-tier cities and showcases a successful project in Chongqing, challenging negative perceptions of the sector.
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Capital Cycle Determines Industry Fate
- Capital-cycle dynamics determine whether a housing bust leads to consolidation or prolonged stagnation.
- US post-2008 saw creative destruction and stronger builders while Japan preserved fragmented, weak firms.
Consolidation Fueled Post-Crisis Profitability
- Post-2008 US homebuilding consolidated heavily, cutting builders by half and raising market concentration.
- Less supply then produced higher prices and much stronger profitability for surviving firms.
Japan's Fragmentation Kept Prices Depressed
- Japan avoided consolidation after its 1990 bubble and kept a fragmented homebuilding sector.
- Sustained supply kept housing starts steady and led to decades of price deflation and weak profitability.
