9 ms·

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 buildi

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
  Where do get 10k from? Even your quote says 1k.
mithold 9y ago
If apartments are so expensive shouldn't that drive more construction? I wonder why construction has slowed/stopped if the existing stock is renting at such high levels.
- netheril96 9y ago
  Because the government restricts the supply.
  - apsec112 9y ago
    That's true in most of the West, but if there are a bunch of half-completed buildings lying around, it's probably not the explanation in China.
    - sjg007 9y ago
      Well half completed buildings are not worth anything if they can't be occupied?
- seanmcdirmid 9y ago
  You'd be surprised how much commercial real estate turned residential in Beijing illegally (e.g. Soho jianwai near guomao). I'm guessing there is a lot of residential supply, it just isn't on the market.
havetocharge 9y ago
I wonder if there might be a global housing crisis in the future. I know the population is constantly growing, but there has been a massive amount of construction of residential buildings world-wide (due to prolonged period of low interest rates, as well as rapid appreciation of existing assets).
- tehlike 9y ago
  Real estate is somewhat local. Bay area gets less construction because of zoning and nimby.
- ido 9y ago
  Population growth has been slowing since 1989 and the population in total is predicted to peak between the mid and late 21st century[1]. In many western countries this has already happened. [1] https://en.wikipedia.org/wiki/Population_growth https://en.wikipedia.org/wiki/Population_growth
  - bogomipz 9y ago
    From you own link: "The United Nations Population Division projects world population to peak at over 10 billion at the end of the 21st century, but Sanjeev Sanyal has argued that global fertility will fall below the replacement rate in the 2020s and that world population will peak below 9 billion by 2050, followed by a long decline. A 2014 study in Science concludes that the global population will reach 11 billion by 2100, with a 70% chance of continued growth into the 22nd century." So clearly there is disagreement between those two. Using the 2014 study, there would be an increase in the current population(~7 billion) by greater than 50% and continued growth for another centruy.
  - Someone 9y ago
    On the other hand, the number of persons per household still has quite a bit of room for dropping in many parts of the world. The USA seems to have plateaued there at about 2.5 (https://www.statista.com/statistics/183648/average-size-of-households-in-the-us/ https://www.statista.com/statistics/183648/average-size-of-h...), but China still is at 3.0, and India at 4.8 (https://en.m.wikipedia.org/wiki/List_of_countries_by_number_of_households https://en.m.wikipedia.org/wiki/List_of_countries_by_number_...). If both drop to 2.5, that's 20% potential growth in China and over 90% for India. Whether that will happen and at what speed of course is anybody's guess.
puranjay 9y ago
Similar situation here in some parts of India. There are dollar millionaires on paper with family incomes of under $1500/month, all because they bought an apartment in Delhi 10 years ago. The problem is, there are no buyers. The apartments are priced at $1M on paper, but there are no buyers. I wonder what will happen once the bubble collapses. A good brand new apartment in a decent part of Gurgaon, India, will set you back by at least $800+/month
- ams6110 9y ago
  You can price something at whatever you want, but if there are no buyers, it's not worth that.
  - seanmcdirmid 9y ago
    China is a bit different: the real estate agencies that will show your apartment won't bother listing and showing it if it's under a certain price. They basically work together to drive up prices, which also leads to higher commissions of course, but there is also some government control as the agencies are all owned by princelings. You can't really hope to sell without an agent, so you can't drop your price even if you wanted to. I'm not sure if India has a similar problem.
    - diminish 9y ago
      In a similar country to China, Let's say the last deal in a certain area was done for $1M 5 months ago. At this point all similar apartments in the area are considered or put on sales at this or a higher value. Then time elapses with no new deal but owners feel wealthy.
    - drieddust 9y ago
      India is exactly the same. Collusion between developers and politicians is creating an illusion that everything is all right and prices are going to go up again so a minority with surplus money left is still buying. I have two personal example. Despite my reasonable arguments my family invested close to 1 crore (10 million) Indian rupees in property for a meager 3% per annum returns in rental income. I feel the pinch because a significant part of it is my hard earned money. Sometimes you just can't help it. Then there is a friend who is buying another flat because he has accumulated some money by living outside India. He thinks he will sell it at a higher price in couple of years. Any evidence based arguments about history of real estates failures are simply ignored. Everybody thinks this India is different. Reason just fails when competition between neighbours takes over to hoard more and more.
sjg007 9y ago
It's weird. In mountain view you can buy at 1.5m but rent around 4k ish.
- thaumasiotes 9y ago
  The Chinese are big, big believers in buying your own home. That can translate into lower rents for a given purchase price. (Or, equivalently but possibly easier to understand, higher prices for a given rent.)
  - seanmcdirmid 9y ago
    Also, until recently, renting conferred no social benefits that buying did; the most important being placement in a local public school. Guangzhou is piloting giving renters more social benefits, other cities are supposed to follow, but this is super recent.
    - dis-sys 9y ago
      Such claim is highly misleading at best. Think about those millions of migrant workers in Shenzhen and their children, did they go to some kind of public schools in the last 3 decades? did they all go to private ones or stay uneducated? surely they went to public schools dedicated to them. They now demand _better_ education and access to _better_ public schools, which is totally fine. However, the real problem here is how many of them are paying tax/social security contribution when compared to the rest of the population? e.g. how many people actually believe that those construction workers building skyscrapers in Shenzhen actually pay a fair amount of tax/social security contribution? Guangzhou is piloting a new level of PC without addressing any real issue.
      - seanmcdirmid 9y ago
        Wow, I don't think you are Chinese because you really don't know much about hukou, of which the rent issue isn't even getting near. First answer: mostly no. Second answer: most of them stayed home with grand parents (see China's left behind children problem). Third answer: there were cheap private schools dedicated to migrant worker kids, but the cities (like Beijing) shut them down saying they would try to take them in public schools, a promise that is never kept. As a foreigner higher paid "migrant worker", we are not garaunteed access to public Chinese schools even if we pay taxes. We have to use private international schools for our kids instead. Public is just not an option. For my Chinese colleagues at work who lack hukou, ditto, though they can try to negotiate their way in to varying degrees of payment and success. Guangzhou is doing a couple of things: those with skilled worker permits who are paying tax can get schooling for their kids even if they don't have hukou, a novel thing in china. And you can get priority access to a school in the local area just by renting an apartment. Those construction workers do pay social tax contributions, and no, they aren't treated fairly at all because of their rural hukou. The GZ policy isn't even really aimed at people like them, it is rather aimed at people like us who make much more money. See: http://www.globaltimes.cn/content/1057090.shtml http://www.globaltimes.cn/content/1057090.shtml (Using very recent Chinese sources). They specifically require a "highly skilled worker certificate in lieu of hukou". So as usual china doesn't care about poor migrant workers, they have to leave their kids behind.
ChuckMcM 9y ago
As someone 'on the ground' as it is I wonder if you know what ever happened to Broad Group[1] and their Sky City project [2]. Was that just a PR stunt for the company or do you think they will ever actually build something like that. [1] http://en.broad.com/ http://en.broad.com/ [2] https://en.wikipedia.org/wiki/Sky_City_(Changsha) https://en.wikipedia.org/wiki/Sky_City_(Changsha)
- contingencies 9y ago
  That's a different part of China, but I can tell you that I know of at least one functional automated building solution under heavy R&D right here in Shenzhen with a reported R&D-only capex of over USD$1M/month. Will it happen? Yes.
  - ChuckMcM 9y ago
    That is good to know. I expect that one possible future has rising sea levels creating 'cities on demand' on higher ground as people wait to the last minute to adapt. With a capability inland of the level projected by Broad group it would be possible to create housing for over several million people per year.
    - contingencies 9y ago
      Centrally conceived housing projects don't exactly have a glowing report card.
      - ChuckMcM 9y ago
        No, they do not. That said, the capability to house millions of people in 'new' construction over a short period of time (less than a year) is a new capability that is only now becoming possible. One of the things I try to avoid is assuming that problems that had either no solution or only bad solutions in the past, continue to have only bad solutions.
MarkMc 9y ago
> purchasing a small apartment now costs about the same as Sydney, with a median price above USD$1M Wow. What is the median salary in Shenzhen? And how do people who earn that afford million dollar apartments?
- contingencies 9y ago
  What is the median salary in Shenzhen? Very few people earn salaries over 20,000CNY/month (USD$3k), most white collar professionals are in the 6-10,000CNY/month range (~USD$1-1.5k+). How do people who earn that afford million dollar apartments? They don't. They bought them years earlier, when they were way cheaper.
Nokinside 9y ago
Fortunately there is still few decades of continuing albeit slowing urbanization and economic growth left for Chinese economy. Hundred million or more people are still going to move to cities. Even slowing down Chinese economy has massive infrastructure needs left. Empty space will be filled years later. Investors will suffer heavy losses but the material investments will contribute to the economy. Investment boom is the easiest problem to solve. Pollution is far worse problem and needs quick solutions. Pollution may be part of the reason why infrastructure doesn't sell. Shenzhen has the best air quality of the largest cities, but it still feels bad and above WHO safe limits.
api 9y ago
Half finished buildings... As if Shenzhen wasn't already cyberpunk enough.
omegaworks 9y ago
Strange that the boom ended and there's a glut in supply but the rental prices are so high. Seems to counter the prevailing narrative that "build! build! build!" housing supply increases will drive down rents. Or is it just too early to tell?

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
Where do get 10k from? Even your quote says 1k.

mithold 9y ago

If apartments are so expensive shouldn't that drive more construction? I wonder why construction has slowed/stopped if the existing stock is renting at such high levels.

netheril96 9y ago
Because the government restricts the supply.
- apsec112 9y ago
  That's true in most of the West, but if there are a bunch of half-completed buildings lying around, it's probably not the explanation in China.
  - sjg007 9y ago
    Well half completed buildings are not worth anything if they can't be occupied?
seanmcdirmid 9y ago
You'd be surprised how much commercial real estate turned residential in Beijing illegally (e.g. Soho jianwai near guomao). I'm guessing there is a lot of residential supply, it just isn't on the market.

havetocharge 9y ago

I wonder if there might be a global housing crisis in the future. I know the population is constantly growing, but there has been a massive amount of construction of residential buildings world-wide (due to prolonged period of low interest rates, as well as rapid appreciation of existing assets).

tehlike 9y ago
Real estate is somewhat local. Bay area gets less construction because of zoning and nimby.
ido 9y ago
Population growth has been slowing since 1989 and the population in total is predicted to peak between the mid and late 21st century[1]. In many western countries this has already happened. [1] https://en.wikipedia.org/wiki/Population_growth https://en.wikipedia.org/wiki/Population_growth
- bogomipz 9y ago
  From you own link: "The United Nations Population Division projects world population to peak at over 10 billion at the end of the 21st century, but Sanjeev Sanyal has argued that global fertility will fall below the replacement rate in the 2020s and that world population will peak below 9 billion by 2050, followed by a long decline. A 2014 study in Science concludes that the global population will reach 11 billion by 2100, with a 70% chance of continued growth into the 22nd century." So clearly there is disagreement between those two. Using the 2014 study, there would be an increase in the current population(~7 billion) by greater than 50% and continued growth for another centruy.
- Someone 9y ago
  On the other hand, the number of persons per household still has quite a bit of room for dropping in many parts of the world. The USA seems to have plateaued there at about 2.5 (https://www.statista.com/statistics/183648/average-size-of-households-in-the-us/ https://www.statista.com/statistics/183648/average-size-of-h...), but China still is at 3.0, and India at 4.8 (https://en.m.wikipedia.org/wiki/List_of_countries_by_number_of_households https://en.m.wikipedia.org/wiki/List_of_countries_by_number_...). If both drop to 2.5, that's 20% potential growth in China and over 90% for India. Whether that will happen and at what speed of course is anybody's guess.

puranjay 9y ago

Similar situation here in some parts of India. There are dollar millionaires on paper with family incomes of under $1500/month, all because they bought an apartment in Delhi 10 years ago. The problem is, there are no buyers. The apartments are priced at $1M on paper, but there are no buyers. I wonder what will happen once the bubble collapses. A good brand new apartment in a decent part of Gurgaon, India, will set you back by at least $800+/month

ams6110 9y ago
You can price something at whatever you want, but if there are no buyers, it's not worth that.
- seanmcdirmid 9y ago
  China is a bit different: the real estate agencies that will show your apartment won't bother listing and showing it if it's under a certain price. They basically work together to drive up prices, which also leads to higher commissions of course, but there is also some government control as the agencies are all owned by princelings. You can't really hope to sell without an agent, so you can't drop your price even if you wanted to. I'm not sure if India has a similar problem.
  - diminish 9y ago
    In a similar country to China, Let's say the last deal in a certain area was done for $1M 5 months ago. At this point all similar apartments in the area are considered or put on sales at this or a higher value. Then time elapses with no new deal but owners feel wealthy.
  - drieddust 9y ago
    India is exactly the same. Collusion between developers and politicians is creating an illusion that everything is all right and prices are going to go up again so a minority with surplus money left is still buying. I have two personal example. Despite my reasonable arguments my family invested close to 1 crore (10 million) Indian rupees in property for a meager 3% per annum returns in rental income. I feel the pinch because a significant part of it is my hard earned money. Sometimes you just can't help it. Then there is a friend who is buying another flat because he has accumulated some money by living outside India. He thinks he will sell it at a higher price in couple of years. Any evidence based arguments about history of real estates failures are simply ignored. Everybody thinks this India is different. Reason just fails when competition between neighbours takes over to hoard more and more.

sjg007 9y ago

It's weird. In mountain view you can buy at 1.5m but rent around 4k ish.

thaumasiotes 9y ago
The Chinese are big, big believers in buying your own home. That can translate into lower rents for a given purchase price. (Or, equivalently but possibly easier to understand, higher prices for a given rent.)
- seanmcdirmid 9y ago
  Also, until recently, renting conferred no social benefits that buying did; the most important being placement in a local public school. Guangzhou is piloting giving renters more social benefits, other cities are supposed to follow, but this is super recent.
  - dis-sys 9y ago
    Such claim is highly misleading at best. Think about those millions of migrant workers in Shenzhen and their children, did they go to some kind of public schools in the last 3 decades? did they all go to private ones or stay uneducated? surely they went to public schools dedicated to them. They now demand _better_ education and access to _better_ public schools, which is totally fine. However, the real problem here is how many of them are paying tax/social security contribution when compared to the rest of the population? e.g. how many people actually believe that those construction workers building skyscrapers in Shenzhen actually pay a fair amount of tax/social security contribution? Guangzhou is piloting a new level of PC without addressing any real issue.
    - seanmcdirmid 9y ago
      Wow, I don't think you are Chinese because you really don't know much about hukou, of which the rent issue isn't even getting near. First answer: mostly no. Second answer: most of them stayed home with grand parents (see China's left behind children problem). Third answer: there were cheap private schools dedicated to migrant worker kids, but the cities (like Beijing) shut them down saying they would try to take them in public schools, a promise that is never kept. As a foreigner higher paid "migrant worker", we are not garaunteed access to public Chinese schools even if we pay taxes. We have to use private international schools for our kids instead. Public is just not an option. For my Chinese colleagues at work who lack hukou, ditto, though they can try to negotiate their way in to varying degrees of payment and success. Guangzhou is doing a couple of things: those with skilled worker permits who are paying tax can get schooling for their kids even if they don't have hukou, a novel thing in china. And you can get priority access to a school in the local area just by renting an apartment. Those construction workers do pay social tax contributions, and no, they aren't treated fairly at all because of their rural hukou. The GZ policy isn't even really aimed at people like them, it is rather aimed at people like us who make much more money. See: http://www.globaltimes.cn/content/1057090.shtml http://www.globaltimes.cn/content/1057090.shtml (Using very recent Chinese sources). They specifically require a "highly skilled worker certificate in lieu of hukou". So as usual china doesn't care about poor migrant workers, they have to leave their kids behind.

ChuckMcM 9y ago

As someone 'on the ground' as it is I wonder if you know what ever happened to Broad Group[1] and their Sky City project [2]. Was that just a PR stunt for the company or do you think they will ever actually build something like that. [1] http://en.broad.com/ http://en.broad.com/ [2] https://en.wikipedia.org/wiki/Sky_City_(Changsha) https://en.wikipedia.org/wiki/Sky_City_(Changsha)

contingencies 9y ago
That's a different part of China, but I can tell you that I know of at least one functional automated building solution under heavy R&D right here in Shenzhen with a reported R&D-only capex of over USD$1M/month. Will it happen? Yes.
- ChuckMcM 9y ago
  That is good to know. I expect that one possible future has rising sea levels creating 'cities on demand' on higher ground as people wait to the last minute to adapt. With a capability inland of the level projected by Broad group it would be possible to create housing for over several million people per year.
  - contingencies 9y ago
    Centrally conceived housing projects don't exactly have a glowing report card.
    - ChuckMcM 9y ago
      No, they do not. That said, the capability to house millions of people in 'new' construction over a short period of time (less than a year) is a new capability that is only now becoming possible. One of the things I try to avoid is assuming that problems that had either no solution or only bad solutions in the past, continue to have only bad solutions.

MarkMc 9y ago

> purchasing a small apartment now costs about the same as Sydney, with a median price above USD$1M Wow. What is the median salary in Shenzhen? And how do people who earn that afford million dollar apartments?

contingencies 9y ago
What is the median salary in Shenzhen? Very few people earn salaries over 20,000CNY/month (USD$3k), most white collar professionals are in the 6-10,000CNY/month range (~USD$1-1.5k+). How do people who earn that afford million dollar apartments? They don't. They bought them years earlier, when they were way cheaper.

Nokinside 9y ago

Fortunately there is still few decades of continuing albeit slowing urbanization and economic growth left for Chinese economy. Hundred million or more people are still going to move to cities. Even slowing down Chinese economy has massive infrastructure needs left. Empty space will be filled years later. Investors will suffer heavy losses but the material investments will contribute to the economy. Investment boom is the easiest problem to solve. Pollution is far worse problem and needs quick solutions. Pollution may be part of the reason why infrastructure doesn't sell. Shenzhen has the best air quality of the largest cities, but it still feels bad and above WHO safe limits.

api 9y ago

Half finished buildings... As if Shenzhen wasn't already cyberpunk enough.

omegaworks 9y ago

Strange that the boom ended and there's a glut in supply but the rental prices are so high. Seems to counter the prevailing narrative that "build! build! build!" housing supply increases will drive down rents. Or is it just too early to tell?