As I see it | China’s extended property slump was always expected

History does not repeat itself, as the saying goes, but it often rhymes. That very much depends on the kind of history being considered. If you are talking about real estate and the stock market, history absolutely repeats itself, almost like an eternal recurrence. Maybe it’s because greed and fear are ingrained in human nature. The claim that “this time is different” has been called the four most dangerous words in investment.

Lam earned a good deal of street cred in early 2021 by correctly downgrading the now-liquidated China Evergrande Group – often described as the world’s most indebted developer – almost a year before it defaulted on its debt.

Sadly, he has now rejoined the pessimistic consensus of his peers and predicted at least another two years before recovery for the depressed residential property market, now in its fourth year of downturn. “People who bought homes in the past decade may all be loss-making,” he told Bloomberg.

Those who have studied the aftermath of the bursting of giant property bubbles won’t be surprised. China’s prolonged slump is not the exception but the rule.

In his classic Manias, Panics, and Crashes: A History of Financial Crises, the late economic historian Charles Kindleberger examined the history of real estate in Chicago and Japan as being paradigmatic of the recurrent rise and fall of the property sector: the bigger and longer the bubble, the worse the economic fallout. The depressed market that follows tends to be prolonged.