More evidence China’s property market is cooling. This time it comes from a survey of 300 sales offices in 40 Chinese cities just published in the Financial Times (FT)…

As I’ve pointed out in previous entries, there is a massive construction boom in apartment buildings happening in China right now.

There must be over 100,000 new towers going up at this very moment, all over China. Cranes on the roofs, men in yellow vests, sparks flying… the whole thing.

It’s such a massive project, I’ve compared it to the building of the Terracotta Army in 200 B.C. It must account for a huge portion of China’s current GDP…

(The FT says real estate is 20% of China’s GDP. I think it’s bigger… see below.)

If China’s housing market turns down long term, it’ll have consequences all over the world…

Dragon’s Teeth

Greetings from China!

We’ve been traveling around the world now – living out of a suitcase, sleeping in cheap hotels – for nearly 18 months.

You might think we’d get tired or “over” this lifestyle after spending so much time on the road, but we continue to have the BEST time.

We’re in a place called Yangshuo, in southern China, which is famous for its landscape of karst formations.

They look like dragon’s teeth covered in dense tropical foliage. Thousands of them all over the place. It’s one of the most beautiful landscapes we’ve ever seen.


You can see one of Yangshuo’s famous “karst” formations up close on the left here

Today, we took the boys to climb one of the karsts.

It was a fantastic day. Another one! (Every day on this trip is “another fantastic day.” I don’t want this trip to ever end.)

Anyway, we’ll have more fun tomorrow. Then the next day, we go to Hong Kong by bullet train. We’re planning to go to Disneyland there. Hong Kong tourism is down more than 50%, so hopefully Disney won’t be busy…

Here are the boys climbing…


Miles and Dusty climbing one of the “dragon’s teeth” in Yangshuo, our last stop in China

Red-Hot Property Market

The Chinese LOVE owning property.

As I explained last week, Chinese culture sees property as the best store of value for life savings. More than 70% of private wealth is tied up in property. Sometimes men cannot get married unless they own a property.

According to the FT, 90% of Chinese households own at least one property, and 35% own two or more.

Most people alive in China today have never seen a decline in property prices. Prices have been rising continuously for decades. And as you’d expect, with China’s incredible economic transformation over the last two decades, China has had a red-hot property market.

They call it the “Iron Bubble.”

In places like Beijing and Shanghai, apartment prices have risen 15x since 2003. And even in recent years, it’s shown no sign of slowing down. My friend Jessica says her apartment in Xi’an, a big city in central China, has doubled in price in the last three years. Until now…

The Catalyst for the Next Recession

Last week, I reported that Beijing property prices have started to fall.

The FT just released its China Real Estate Survey. It shows slowing sales volumes and falling prices across 40 cities in China.

“The Index fell to a three-month low in October,” the FT says. “And 2019 is shaping up to be the second weakest year for the housing market since our series began at the end of 2012.”

And “28% of property owners in China now say one or more of their properties currently stand empty.”

If property prices keep falling – and I think that’s likely, with the glut of new apartments about to hit the market and the high level of vacant units already on the market – China could see a recession in the construction industry.

But even more worrying, if property prices fall, there’ll be a big hit to consumer spending. (Property prices and consumption spending are highly correlated, meaning they tend to move together.)

Consumer spending represents 60% of China’s economic activity.

If my central hypothesis about the Dow-to-Gold ratio is correct, we’ll see at least three recessions over the next decade.

China is the world’s second-largest economy and the fastest-growing big economy. Falling Chinese property prices could be the catalyst for the next recession. Stay tuned…

– Tom Dyson

P.S. Here we are in the common area of our new hostel…


From right to left: Penny and Miles serenade Dusty while he plays a round of UNO

Like what you’re reading? Send your thoughts to [email protected].


Readers write in about their experiences with Chinese culture… how changes in society impact our mental health (after Tom shared this personal story)… and Tom’s thoughts on buying silver and gold “culls” (read on if you don’t know what these are)…

Reader comment: I’m not an investor, but read the posts from you and your colleagues to expand my thinking. Postcards is the best.

We’ve now had two grad students from China as room tenants. I love China’s traditional culture, and I’m now getting exposure to modern China – fascinating. Its tech mentality (surveillance, cashless society) seems to be overtaking the world. My tenants have been sweethearts, giving a favorable human face to the scary stories about China’s totalitarian modus operandi.

God bless you and your intrepid family. It would have been a sweet dream to have given my kids the education yours are getting.

Reader comment: I’ve been happily part of the crowd following along on your journey with no desire to comment until now. I was so moved by your post about your family’s educational choices and those of the Chinese innkeepers.

You and Kate have learned well your lessons on how to give your kids every advantage to succeed in a global community and still have Mom and Dad to tuck them in at night. It seems to me that you are teaching what you have learned, that love is the most important foundation of a successful life.

Your kids are incredibly fortunate to have firsthand exposure to how different people live and think, and even if they are finally growing tired of the adventure, it will be with them for the rest of their lives, offering up nuggets of wisdom at unexpected moments. It is my wish for all five of you to continue having successful, happy, and love-filled lives. Your kids are well-prepared for them.

Reader comment: I am fascinated with human psychology. One of your earlier posts where you shared the mentally challenged state you were in and the “magic cure” (my words) of merely going and being free, coupled with the constant companionship/love of those you are closest to, was simply awesome to read.

I sincerely hope, if not pray, that you will write about this extensively in a book when your trip has concluded.

I have felt for so many years that one of our greatest societal issues is how terribly disjointed our daily lives have become. The solution: become connected again at our most basic relationships. In other words, you are displaying the “fix,” if you will. Please write on this, and if you do, I really hope it is a HUGE success, and even better – if I may dream – will become a national topic of discussion!

Tom’s response: Thank you for this message. You’ve hit the bullseye here. This needs to be the central message of our story.

Reader question: I’m buying gold in Australian dollars (AUD), and because the AUD is weak, I’m paying a hefty sum to buy gold. Is it still a good strategy? My worry is that it will get strong against the greenback, and I’d have effectively lost money.

Tom’s response: I understand your apprehension. I can’t give you personal advice. But my view is, over the next 10 years, there’s going to be a universal synchronized devaluation in paper currencies.

Gold is going to soar. The dollar will be one of the stronger paper currencies, but it won’t come close to matching the strength of gold.

I don’t have any particular insight into USD/AUD except they’re both going to fall.

Reader question: Hi, I enjoy your reads. Every summer, my family travels for 10 weeks across America. I was hoping to continue this tradition for another decade. My children are 11, 9, and 7.

I have one big problem: Two years ago, my children said that they do not want to go anymore. For the past two years, it has been very hard. Any advice?

Tom’s response: I ran your question past Kate. “Tough question,” Kate says. We assume they don’t want to go because they don’t like the interruption to their normal lives?

I’d ask myself what’s best for the family. And I’d let the answer to that question guide me. It’s Pete Carroll’s Rule No. 1. “Always protect the team.”

Reader question: What do you think of gold and silver culls? They are very easy to sell because each one is unique and anyone can see that they are real. Made in the USA.

Tom’s response: A cull is a gold or silver coin with manufacturing defects. As I’ve said, my only goal when buying gold and silver is to get as much pure gold or silver for my money. I like antique collectible coins, but I wouldn’t buy them unless the actual gold was cheaper than the gold I could get elsewhere. Same goes for culls.

By the way, “unique” or “mutant” is not a virtue in investing. You want to buy things that will be easily comparable and acceptable to buyers when it comes time to sell. Commodities, in other words.

Reader question: I suspect you are familiar with the Jim Rogers books Investment Biker and Street Smarts. Your postcards are reminiscent of those, mixing life, travel, and adventure anecdotes with observations on markets and society.

I look forward to reading your book when it’s published. In the meantime, please keep the postcards coming.

Tom’s response: Yes! Investment Biker was the first investment book I read, and I’ll never forget it. Jim Rogers has definitely been one of my inspirations.

Please keep writing us at [email protected]. Your questions and comments are an integral part of this project, and Kate and I read every one.