11 ms·

Shenzhen's never-ending skyscraper boom

144 points by fmihaila 9y ago

seanmcdirmid 9y ago
China is currently caught in a trap between speculative demand, demand by speculators who hope real estate asset prices will keep increasing, and real demand of actual use for these assets. It is difficult to see what the real demand for these sky scrapers are, even if they have no problem selling them off to speculators. Who knows how this will end, hopefully real demand will catch up but I'm guessing there will be a Japan-scale real estate crash eventually. I was fortunate to stay at the hotel at the top of Guangzhou's IFC (the first and probably last time I get a room that is above the 90th floor). Looking down on Guangzhou's skyline, at least, it was very beautiful (especially when a lightning storm rolled in).
- zhte415 9y ago
  China has enough urban residential capacity to house the urban population three times over; that's almost the entire country. Looking for public link as was from private paper.
  - dis-sys 9y ago
    nonsense. buy yourself a ticket, check all those tier-1/2/3 cities, check the lights of all those apartment blocks at 8pm.
    - zhte415 9y ago
      Not at all nonsense. Living in China for a decade+ 'buying a ticket'? What? Really?
- ehnto 9y ago
  My biggest issue with my local housing market is what you might consider a commercialisation of residential real estate. Property prices don't reflect their value as places to live and their location, but rather their ability to be a vehicle for investment income. High rent ensues and yet the lower demand for those properties as rentals doesn't deter the property prices from rising. Currently there are a handful of almost completely empty apartment buildings in the CBD. People can't afford to rent or buy them yet they still move about the property market. At some point they will surely come back into circulation at a price that makes sense for individuals, that is of course if they aren't all owned entirely by corporate scale landlords with bigger pockets.
  - seanmcdirmid 9y ago
    Rents are pretty low in china relative to sale prices. In Beijing at least, you'll pay around $2k for something that costs a million to buy; I'm guessing Shenzhen is similar if not as bad. It isn't worth it for speculators to rent as renovations reduce value; apartments are bought unrenovated only, all previous owner renovations have to be torn out because no one likes or trusts other people's renovations. So a lot of empty apartments are waiting to be flipped, but, even though prices are sky high, sales volume can be very anemic.
  - chii 9y ago
    > yet the lower demand for those properties as rentals doesn't deter the property prices from rising. this is an interesting phenomenon, because it's the same mechanism (imho anway, as an armchair economist) as gold prices rising during uncertain times. The actual use of gold is little to none, and yet, as a store of value, everyone in the society agrees on its stability/valuation, even in times of gov't hostility. If you look at property this way, chinese speculators are using the same line of thinking - where they actually don't want the apartment to be rented out (and thus, look/feel 'used'). The price reflects not the utility, but as a store of value. I think the fundamental reason this is happening is that the chinese do not trust their own gov't enough to store their assets in a more liquid form. Or, perhaps there's really no other forms of storage that's not risky. And those who can't bring their currency assets out of the country then must choose real-estate.
    - paradite 9y ago
      > I think the fundamental reason this is happening is that the chinese do not trust their own gov't enough to store their assets in a more liquid form. Not really, it is as simple as "It is more profitable and equally risk-free to buy house than letting money rot in the bank." People are still rushing to buy whatever government bonds as soon as they are available, because they pay good interests and are less risky. People in China are driven by pragmatism more than loyalty or distrust in the government.
    - ehnto 9y ago
      You can see the utility as a store of value in international investment properties too. A part of the problem driving prices up in my locale. Chinese and other international investors seeking to store wealth will purchase properties here, and they will pay prices that the local market wouldn't. That drives the prices up, as locals with property want a piece of that international cash. Meanwhile the property can go underutilized and the community it is in gains nothing.
- Nokinside 9y ago
  China is caught in a position where speculative demand outpaced real demand by several years. It's failure in timing, not failure in estimating actual future demand. Unlike Japan, China is still in the midst of urbanization and growth. The gradually slowing pace of growth and urbanization does not mean that the scale of infrastructure investments is outpacing the eventual need. Over 100 million people have still to find their place in cities. China will start to resemble Japan around 2040-2050. Investors are hurt and timing misallocation is not a good thing, but China is not where Japan was in the 90's.
contingencies 9y ago
Here in Shenzhen, I would argue that it's fairly clear to anyone on the ground that the boom has ended. There are currently a host of half-finished huge buildings that are not being completed. For instance, I can see a bunch from my window. This is most likely due to lapsed demand and reduced speculative investment in the sector. This is really just a delayed adjustment along the lines of an established national change, Shenzhen possibly encountered the slowdown later owing to increased expectations/hype/financing availability and special economic and political darling status. I would say from physical observation that the second half of last year was the real slow down, things haven't changed much since then. The local real estate market is pretty expensive... a lot of people who bought apartments 10 years ago are now USD multi-millionaires, despite having real incomes as low as 1-2000USD/month. As a consequence of consistent price growth, purchasing a small apartment now costs about the same as Sydney, with a median price above USD$1M. It is fairly difficult to rent a halfway decent apartment under about 6000CNY (~1000USD)/month, many pay double that or more.
- bogomipz 9y ago
  >"It is fairly difficult to rent a halfway decent apartment under about 6000CNY (~1000USD)/month, many pay double that or m" I'm guessing that $10K is supposed to be $1K US? Paying double that or more would put on par with places like NYC as well. Is none of that new real estate for the rental market then? Usually when the demand dries up for purchase developers will put them on the market as rentals so they are at least generating income. I'm guessing this maybe just hasn't happened yet? Or maybe all those high rises are mostly commercial?
  - contingencies 9y ago
    In my observation throughout key parts of the city the vast majority of new real estate visibly under construction is commercial, not residential. Only on the edges do you see new residential development. Therefore, I would hazard a guess that the supply in the most desirable areas has not increased, and perhaps actually decreased.
  - Kiro 9y ago
jordache 9y ago
it may look cool from far away, like a skyline shot, all lit up. However at micro level, streets in China (especially newly developed) are entirely indiscernible and total lack of character. If you watch any of the driving in China videos on youtube, you'll see that streets are lined with shops and sidewalks that are sterile and look identical block after block... There are exceptions of course, city squares, etc, are largely unique from one another.. but once you get into the urban residential and shopping districts, they mostly are all identical
- Galanwe 9y ago
  This is SO true. I live in Hong Kong and whenever I go to Shenzhen I feel like the city is a copy paste of a single street, for kilometers. It feels empty and awkward.
  - contingencies 9y ago
    HK's favourite hobby is Shenzhen bashing. My retort would be: at least Shenzhen residents don't need government housing support! Which areas have you been? There's actually a lot of variation across the city, but single districts tend to be fairly similar. For example, Luowu is old and crowded, and quite built up. Futian is car-oriented, with wide roads and a commercial focus in most areas, but also a cultural area. Huaqiangbei area has huge malls, tech, but also parks and gardens. Nanshan has a lot of tech companies and universities, but also some lovely green areas. Shekou is another old area but with a glitzy mall zone as well. Houhai is a huge mall area with a theater and open public space. Qianhai is an emerging financial district with lots of apartments and westerly water views. There are numerous mountains across the city, many of which have nice streets and parks nestled against them. Then there is the semi-industrial Bao'an district, a lot of waterfront parks, beaches out to the east, etc. It's pretty varied I'd say. Perhaps you just haven't seen enough of it?
    - mstaoru 9y ago
      Lived 3 years in Shenzhen, and 2 years in HK. Now I live in Shanghai. From my perspective, what the grandparent said about Shenzhen is very true. You just can't compare "green areas" in Shenzhen (Wutong mt? Meilin? What else?) to the enormous and amazing network of country trails like MacLehose Trail in Hong Kong. Is it also incredibly diverse, you can walk around posh Central, then hop on a ferry to Lamma or Cheung Chau and be on a beach in 20 minutes. Come back and walk 20 minutes up to SoHo/PoHo area, walk through Lan Kwai Fong and climb the Mid-level Escalators (amazing by itself) up, walk the Bowen road through the beautiful greenery and descend into hectic Causeway Bay area. Hong Kong is endless and people are actually interesting and open. Shenzhen is one giant construction site where people just work, gorge on food, and shop. Absolutely soulless.
firedev 9y ago
It would be much nicer if they didn't put photos of Moscow to illustrate China.
- joveian 9y ago
  And if they didn't only name US and British designers.
- elefanten 9y ago
  If you read the captions, it's attributed properly.
coldcode 9y ago
A former coworker from China said a lot of real estate (particularly civil construction) happens when a new mayor or other leader gets appointed. New construction is a great source of graft - I will order the new construction if you give me 10% (or whatever the rate is). So things get built over and over again, or built and abandoned.

144 points by fmihaila 9y ago

China is currently caught in a trap between speculative demand, demand by speculators who hope real estate asset prices will keep increasing, and real demand of actual use for these assets. It is difficult to see what the real demand for these sky scrapers are, even if they have no problem selling them off to speculators. Who knows how this will end, hopefully real demand will catch up but I'm guessing there will be a Japan-scale real estate crash eventually. I was fortunate to stay at the hotel at the top of Guangzhou's IFC (the first and probably last time I get a room that is above the 90th floor). Looking down on Guangzhou's skyline, at least, it was very beautiful (especially when a lightning storm rolled in).

zhte415 9y ago
China has enough urban residential capacity to house the urban population three times over; that's almost the entire country. Looking for public link as was from private paper.
- dis-sys 9y ago
  nonsense. buy yourself a ticket, check all those tier-1/2/3 cities, check the lights of all those apartment blocks at 8pm.
  - zhte415 9y ago
    Not at all nonsense. Living in China for a decade+ 'buying a ticket'? What? Really?
ehnto 9y ago
My biggest issue with my local housing market is what you might consider a commercialisation of residential real estate. Property prices don't reflect their value as places to live and their location, but rather their ability to be a vehicle for investment income. High rent ensues and yet the lower demand for those properties as rentals doesn't deter the property prices from rising. Currently there are a handful of almost completely empty apartment buildings in the CBD. People can't afford to rent or buy them yet they still move about the property market. At some point they will surely come back into circulation at a price that makes sense for individuals, that is of course if they aren't all owned entirely by corporate scale landlords with bigger pockets.
- seanmcdirmid 9y ago
  Rents are pretty low in china relative to sale prices. In Beijing at least, you'll pay around $2k for something that costs a million to buy; I'm guessing Shenzhen is similar if not as bad. It isn't worth it for speculators to rent as renovations reduce value; apartments are bought unrenovated only, all previous owner renovations have to be torn out because no one likes or trusts other people's renovations. So a lot of empty apartments are waiting to be flipped, but, even though prices are sky high, sales volume can be very anemic.
- chii 9y ago
  > yet the lower demand for those properties as rentals doesn't deter the property prices from rising. this is an interesting phenomenon, because it's the same mechanism (imho anway, as an armchair economist) as gold prices rising during uncertain times. The actual use of gold is little to none, and yet, as a store of value, everyone in the society agrees on its stability/valuation, even in times of gov't hostility. If you look at property this way, chinese speculators are using the same line of thinking - where they actually don't want the apartment to be rented out (and thus, look/feel 'used'). The price reflects not the utility, but as a store of value. I think the fundamental reason this is happening is that the chinese do not trust their own gov't enough to store their assets in a more liquid form. Or, perhaps there's really no other forms of storage that's not risky. And those who can't bring their currency assets out of the country then must choose real-estate.
  - paradite 9y ago
    > I think the fundamental reason this is happening is that the chinese do not trust their own gov't enough to store their assets in a more liquid form. Not really, it is as simple as "It is more profitable and equally risk-free to buy house than letting money rot in the bank." People are still rushing to buy whatever government bonds as soon as they are available, because they pay good interests and are less risky. People in China are driven by pragmatism more than loyalty or distrust in the government.
  - ehnto 9y ago
    You can see the utility as a store of value in international investment properties too. A part of the problem driving prices up in my locale. Chinese and other international investors seeking to store wealth will purchase properties here, and they will pay prices that the local market wouldn't. That drives the prices up, as locals with property want a piece of that international cash. Meanwhile the property can go underutilized and the community it is in gains nothing.
Nokinside 9y ago
China is caught in a position where speculative demand outpaced real demand by several years. It's failure in timing, not failure in estimating actual future demand. Unlike Japan, China is still in the midst of urbanization and growth. The gradually slowing pace of growth and urbanization does not mean that the scale of infrastructure investments is outpacing the eventual need. Over 100 million people have still to find their place in cities. China will start to resemble Japan around 2040-2050. Investors are hurt and timing misallocation is not a good thing, but China is not where Japan was in the 90's.

contingencies 9y ago

Here in Shenzhen, I would argue that it's fairly clear to anyone on the ground that the boom has ended. There are currently a host of half-finished huge buildings that are not being completed. For instance, I can see a bunch from my window. This is most likely due to lapsed demand and reduced speculative investment in the sector. This is really just a delayed adjustment along the lines of an established national change, Shenzhen possibly encountered the slowdown later owing to increased expectations/hype/financing availability and special economic and political darling status. I would say from physical observation that the second half of last year was the real slow down, things haven't changed much since then. The local real estate market is pretty expensive... a lot of people who bought apartments 10 years ago are now USD multi-millionaires, despite having real incomes as low as 1-2000USD/month. As a consequence of consistent price growth, purchasing a small apartment now costs about the same as Sydney, with a median price above USD$1M. It is fairly difficult to rent a halfway decent apartment under about 6000CNY (~1000USD)/month, many pay double that or more.

bogomipz 9y ago
>"It is fairly difficult to rent a halfway decent apartment under about 6000CNY (~1000USD)/month, many pay double that or m" I'm guessing that $10K is supposed to be $1K US? Paying double that or more would put on par with places like NYC as well. Is none of that new real estate for the rental market then? Usually when the demand dries up for purchase developers will put them on the market as rentals so they are at least generating income. I'm guessing this maybe just hasn't happened yet? Or maybe all those high rises are mostly commercial?
- contingencies 9y ago
  In my observation throughout key parts of the city the vast majority of new real estate visibly under construction is commercial, not residential. Only on the edges do you see new residential development. Therefore, I would hazard a guess that the supply in the most desirable areas has not increased, and perhaps actually decreased.
- Kiro 9y ago

jordache 9y ago

it may look cool from far away, like a skyline shot, all lit up. However at micro level, streets in China (especially newly developed) are entirely indiscernible and total lack of character. If you watch any of the driving in China videos on youtube, you'll see that streets are lined with shops and sidewalks that are sterile and look identical block after block... There are exceptions of course, city squares, etc, are largely unique from one another.. but once you get into the urban residential and shopping districts, they mostly are all identical

Galanwe 9y ago
This is SO true. I live in Hong Kong and whenever I go to Shenzhen I feel like the city is a copy paste of a single street, for kilometers. It feels empty and awkward.
- contingencies 9y ago
  HK's favourite hobby is Shenzhen bashing. My retort would be: at least Shenzhen residents don't need government housing support! Which areas have you been? There's actually a lot of variation across the city, but single districts tend to be fairly similar. For example, Luowu is old and crowded, and quite built up. Futian is car-oriented, with wide roads and a commercial focus in most areas, but also a cultural area. Huaqiangbei area has huge malls, tech, but also parks and gardens. Nanshan has a lot of tech companies and universities, but also some lovely green areas. Shekou is another old area but with a glitzy mall zone as well. Houhai is a huge mall area with a theater and open public space. Qianhai is an emerging financial district with lots of apartments and westerly water views. There are numerous mountains across the city, many of which have nice streets and parks nestled against them. Then there is the semi-industrial Bao'an district, a lot of waterfront parks, beaches out to the east, etc. It's pretty varied I'd say. Perhaps you just haven't seen enough of it?
  - mstaoru 9y ago
    Lived 3 years in Shenzhen, and 2 years in HK. Now I live in Shanghai. From my perspective, what the grandparent said about Shenzhen is very true. You just can't compare "green areas" in Shenzhen (Wutong mt? Meilin? What else?) to the enormous and amazing network of country trails like MacLehose Trail in Hong Kong. Is it also incredibly diverse, you can walk around posh Central, then hop on a ferry to Lamma or Cheung Chau and be on a beach in 20 minutes. Come back and walk 20 minutes up to SoHo/PoHo area, walk through Lan Kwai Fong and climb the Mid-level Escalators (amazing by itself) up, walk the Bowen road through the beautiful greenery and descend into hectic Causeway Bay area. Hong Kong is endless and people are actually interesting and open. Shenzhen is one giant construction site where people just work, gorge on food, and shop. Absolutely soulless.

firedev 9y ago

It would be much nicer if they didn't put photos of Moscow to illustrate China.

joveian 9y ago
And if they didn't only name US and British designers.
elefanten 9y ago
If you read the captions, it's attributed properly.

coldcode 9y ago

A former coworker from China said a lot of real estate (particularly civil construction) happens when a new mayor or other leader gets appointed. New construction is a great source of graft - I will order the new construction if you give me 10% (or whatever the rate is). So things get built over and over again, or built and abandoned.