China's housing bubble: ghost malls, ghost highrises, and ghost cities

back on topic: what are the causes of the ghost malls, highrises, cities? And is it a problem?

I thought, what with the socialism/capitalism compromise, all land was owned ‘by the people’ aka government controlled and they lease it out long-term to individuals and private interests. This gives the government great control over what goes where and why.

So, it seems obvious to all that the building of these cities is a deliberate ruse to generate income and jobs through land value speculation and building contracts. But it has an ethical dimension, which is what is being neglected, and is representative of the divide between rich and poor.

So, to remedy the problem, the government is now proposing to build more houses to be sold at reasonable prices.

Perhaps the absurdity is: why can’t they use the houses they already have? Why do they have to remain empty while millions live in poverty?

Horses for courses, I’d say. And it’s a good thing, because if they were to really lift their foot from that collective throat, there’d be, as even a scant read of Chinese history will inform you, a gazillion nutjobs ready to pop up and do mass slaughter all over again.

China, the world’s greatest living example of why anarchy is a cute idea for playful university undergrads, but an extremely bad thing in reality.

HG[/quote]

I know that much, given that we both spent years learning about China.

Democracy will most likely not work in China, and China will be caught in her old vicious cycle once the chicoms fall out of the saddle.[/quote]

Like what? (seriously)
Do you reckon there’ll be another age of the Warlords?
If so what will their power and might be based on, do you figure?

[quote=“trubadour”]back on topic: what are the causes of the ghost malls, highrises, cities? And is it a problem?

I thought, what with the socialism/capitalism compromise, all land was owned ‘by the people’ aka government controlled and they lease it out long-term to individuals and private interests. This gives the government great control over what goes where and why.

So, it seems obvious to all that the building of these cities is a deliberate ruse to generate income and jobs through land value speculation and building contracts. But it has an ethical dimension, which is what is being neglected, and is representative of the divide between rich and poor.

So, to remedy the problem, the government is now proposing to build more houses to be sold at reasonable prices.

Perhaps the absurdity is: why can’t they use the houses they already have? Why do they have to remain empty while millions live in poverty?[/quote]

Well, isn’t at least part of the answer that they aren’t being built where there’s any work for folks?
Also that, just like Taiwan (Taipei, anyways), the owners set a fixed rental fee and are more than happy for the structures to remain blissfully vacant rather than take less?

who can really say… but what was proposed was more blood spilled than people are willing to accept. so:
Party goes apeshit and crushes down on major uprisings. that would not lead to a change in thinking or in the way the party and government works… they are dead set in their way of thinking. so what you get for this case (more uprisings than you can crush) would be continuing escalation. and i think you will always have enough uninformed or stupid people in china that would still support the party so there will be no simple change of government since i imagine this is only possible if there is a group up there without support. but support by old party members and and corrupt people not wanting the system to change would run through society. so what you get is “modern” and smart people against party villains (maybe too easy but something along these lines). my point is. there is no way any uprisings caused by major bloodspill could quickly lead to a change in leadership or system which in turn could lead to the uprisings to stop. so in effect you probably get something civil war like again. maybe some regions like xinjiang trying to use the chance to split off and the rest going up in flames. and after that. either everything new crushed and old system again or a new system that will start out well but which in time will also suffer from the same social and traditional mindset drawbacks as the one before and deteriorating again over time into personal gain and corruption and control issues to keep power.

thats just my ideas about this. warlords during that time probably not. more than two factions… maybe.

Still begs the question: wouldn’t the buildings lose value when they are left to deteriorate? All buildings deteriorate with time, but empty ones even more, ironically. In a normal marketplace that would happen. Ironically, it is politics what determines the land value.

I can understand the part of the Party selling the land to Party members, them making big profit from selling/reselling. That is not what is happening. Someone has to invest in the building, the money has to come from somewhere. Please don’t tell me its public funds… What i mean to say is that at some point there has to be a return. If you own the land and sell it to a corporation, then make a profit, OK. But if as a Party memeber and CEO of a State corporation, you use such to erect a building, then leave it there? Or sell it to anotehr Party member? Or sell it to a new borgoise? I really don’t see the profit amounting to anywhere close to what all this smokescreen takes in work and time.

I’d also dare to say that owners in Taipei set the rents high actually in order to keep structures free to unload anytime and not to have to deal with improvements -expenses- of keeping up with basic maintenance, building codes, safety and such nuisances. And most importantly, I bet you they are absent landlords, spending most time abroad, either because they inherited this property and they have no attachments to it -as I’ve heard of some valuable plots in Neihu- or just becaus ethey do not live here anymore.

Horses for courses, I’d say. And it’s a good thing, because if they were to really lift their foot from that collective throat, there’d be, as even a scant read of Chinese history will inform you, a gazillion nutjobs ready to pop up and do mass slaughter all over again.

China, the world’s greatest living example of why anarchy is a cute idea for playful university undergrads, but an extremely bad thing in reality.

HG[/quote]

I know that much, given that we both spent years learning about China.

Democracy will most likely not work in China, and China will be caught in her old vicious cycle once the chicoms fall out of the saddle.[/quote]

Like what? (seriously)
Do you reckon there’ll be another age of the Warlords?
If so what will their power and might be based on, do you figure?[/quote]

Well, what can happen?

A coup at the top, seeing PLA taking over, and running the place as a military dictatorship.

A splintering, where some provinces decide to go it alone, we have seen that before.

Increasing unrest in places like Xinjiang coupled with a decreasing ability of the center to keep the lid on, due to economic growth faltering and the economic white elephants they are busy throwing up becoming too expensive to maintain.

A massive uprising on the scale of Taiping.

Or, all of the above.

[quote=“Icon”]Still begs the question: wouldn’t the buildings lose value when they are left to deteriorate? All buildings deteriorate with time, but empty ones even more, ironically. In a normal marketplace that would happen. Ironically, it is politics what determines the land value.

I can understand the part of the Party selling the land to Party members, them making big profit from selling/reselling. That is not what is happening. Someone has to invest in the building, the money has to come from somewhere. Please don’t tell me its public funds… What I mean to say is that at some point there has to be a return. If you own the land and sell it to a corporation, then make a profit, OK. But if as a Party memeber and CEO of a State corporation, you use such to erect a building, then leave it there? Or sell it to anotehr Party member? Or sell it to a new borgoise? I really don’t see the profit amounting to anywhere close to what all this smokescreen takes in work and time.

I’d also dare to say that owners in Taipei set the rents high actually in order to keep structures free to unload anytime and not to have to deal with improvements -expenses- of keeping up with basic maintenance, building codes, safety and such nuisances. And most importantly, I bet you they are absent landlords, spending most time abroad, either because they inherited this property and they have no attachments to it -as I’ve heard of some valuable plots in Neihu- or just becaus ethey do not live here anymore.[/quote]

Good questions I’d also like to know the answers to. I think you must be right about absentee landlords. They perhaps expect to get all their money back from the resale or are happy to borrow off the current value of their property. I think it is the case that occupancy doesn’t increase value of the land, it is the value of the surrounding land. So, if it is in a busy place where people want to be the value is higher, and if people start bidding for land the value also goes up.

So government agency decides to make x plot of land available to developers. The developers all bid for said land in the hope of being able to recoup the value of the land (at some point in the future) as an asset (land is naturally valuable if someone wants to buy it), to borrow against it, or to sell it on, or a guess a combination of the above.

Maybe the developers really thought people would want to live in these places. Maybe they believe they will in the future. Or maybe like the landlords in Taipei they are just happy to own it.

Regarding the actual building of houses, maybe that is simply a further revenue generator. Maybe the developers get to pass on some of the cost to the building industry, who build on it and sell the properties make money that way? I heard that their is a lot of money to be passed around in this process, regardless if people end up living in these places.

Lots of people have. It’s also what has driven a lot of the protests in Thailand.

Anywhere where the owners are happy to leave apartments empty instead of generating rent is a bubble. Pure and simple. The bubble is fueled by the all time cheap credit lines, has there been anytime in history money has been so easy to borrow in Asia or worldwide? The answer must be no. There are are also limited numbers of players that own a lot of the land, due to their deep pockets and credit lines with low interest rates they don’t have much pressure to sell/rent.
Japan has the best yield (rent to mortgage price) in North Asia, that’s because there is no bubble there anymore, the value of the land/property starts to reflects it’s actual ability to generate revenue.

[quote=“headhonchoII”]Anywhere where the owners are happy to leave apartments empty instead of generating rent is a bubble. Pure and simple. The bubble is fueled by the all time cheap credit lines, has there been anytime in history money has been so easy to borrow in Asia or worldwide? The answer must be no. There are are also limited numbers of players that own a lot of the land, due to their deep pockets and credit lines with low interest rates they don’t have much pressure to sell/rent.
Japan has the best yield (rent to mortgage price) in North Asia, that’s because there is no bubble there anymore, the value of the land/property starts to reflects it’s actual ability to generate revenue.[/quote]

so wat does it all mean

[quote=“Jack Burton”][quote=“headhonchoII”]Anywhere where the owners are happy to leave apartments empty instead of generating rent is a bubble. Pure and simple. The bubble is fueled by the all time cheap credit lines, has there been anytime in history money has been so easy to borrow in Asia or worldwide? The answer must be no. There are are also limited numbers of players that own a lot of the land, due to their deep pockets and credit lines with low interest rates they don’t have much pressure to sell/rent.
Japan has the best yield (rent to mortgage price) in North Asia, that’s because there is no bubble there anymore, the value of the land/property starts to reflects it’s actual ability to generate revenue.[/quote]

so wat does it all mean[/quote]

Than a lot of chinese savers who have put their savings into real estate will take a huge bath.

[quote=“Icon”]Still begs the question: wouldn’t the buildings lose value when they are left to deteriorate? All buildings deteriorate with time, but empty ones even more, ironically. In a normal marketplace that would happen. Ironically, it is politics what determines the land value.

I can understand the part of the Party selling the land to Party members, them making big profit from selling/reselling. That is not what is happening. Someone has to invest in the building, the money has to come from somewhere. Please don’t tell me its public funds… What I mean to say is that at some point there has to be a return. If you own the land and sell it to a corporation, then make a profit, OK. But if as a Party memeber and CEO of a State corporation, you use such to erect a building, then leave it there? Or sell it to anotehr Party member? Or sell it to a new borgoise? I really don’t see the profit amounting to anywhere close to what all this smokescreen takes in work and time.

I’d also dare to say that owners in Taipei set the rents high actually in order to keep structures free to unload anytime and not to have to deal with improvements -expenses- of keeping up with basic maintenance, building codes, safety and such nuisances. And most importantly, I bet you they are absent landlords, spending most time abroad, either because they inherited this property and they have no attachments to it -as I’ve heard of some valuable plots in Neihu- or just becaus ethey do not live here anymore.[/quote]

In China the money is indeed ‘public funds’ through loans from state banks and local governments. Eventually they will be left holding the can for these bust loans. The hope in China is that with ongoing economic growth they can absorb the bad loan impact as a side-effect. But the reality behind all this is that party officials and developers are out to make money as quickly as possible…everybody along the chain…the local politican who artificially boosts GDP, the planners and local officials who take huge bribes, the banker who gets bonuses for loans out, the developers who get access to public land and loans who then build quick and pass on to the public. The local government actually makes an initial revenue boost through property taxes, they don’t need to deal with bad loans until years later when many officials have emigrated, retired or stashed their money elsewhere. Property here is just a nominal asset that is easily tradeable among the population. It could easily be stocks and the stock market or something else given the right conditions.

There is some demand explanation (migration to cities) for what is happening there but like every bubble the demand is ultimately used as a justification for excess. It’s not like there is really a lack of land to build on in China or a lack of cities.
.

A fair bit of those money are coming from state banks - ultimately they are deposits from Chinese savers.

Must really suck, you put some savings in the bank and the rest in a flat. Both goes when the chinese properly bubble goes “poof”.

I read in the papers that some truckers in Shanghai recently decided to take a little break:

[quote]Striking truck drivers protested for a third day yesterday in Shanghai’s main harbor district amid a heavy police presence and signs the action has already started to curb exports from the world’s busiest container port.
The strike is a very public demonstration of anger over rising consumer prices and fuel price increases in China.[/quote]
taipeitimes.com/News/front/archi … 2003501465

Couldn’t agree more with you here! All over the world you see how the best (arable) land is converted into land for buildings and infrastructure - human societies on a collision course with nature.

From statistics I have read China has vastly increased it’s food production over the years, however it is tailing off now. It seems the limiting factor is water supply.

[quote=“Mr He”]A fair bit of those money are coming from state banks - ultimately they are deposits from Chinese savers.

Must really suck, you put some savings in the bank and the rest in a flat. Both goes when the chinese properly bubble goes “poof”.[/quote]

Same place my retirement fund back home went due to the international financial bust… into ether. Very 3rd world, no bank security. Lovely.

[quote=“Mr He”]A fair bit of those money are coming from state banks - ultimately they are deposits from Chinese savers.

Must really suck, you put some savings in the bank and the rest in a flat. Both goes when the chinese properly bubble goes “poof”.[/quote]

Money in a bank in China doesn’t need to wait for the property buble to go ‘poof’. Inflation in China (and many other places) is already eroding the value of savings.

Couldn’t they just substitute melamine?

Couldn’t they just substitute melamine?[/quote]
Might still require water, no?
黄砂 (yellow sand), on the other hand… (we just had another bout of that in Ishigaki…) en.wikipedia.org/wiki/2010_China … ust_storms