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That was my reaction too. Bit of a fluff piece. Here's an interesting link with some opinions from a commodities investor regarding China, and whether the gho
by jwhite 15y ago
That was my reaction too. Bit of a fluff piece. Here's an interesting link with some opinions from a commodities investor regarding China, and whether the ghost cities are a significant problem or not:
http://www.moneymorning.com.au/20110616/why-im-flying-the-flag-for-china.html http://www.moneymorning.com.au/20110616/why-im-flying-the-fl...
He points out that China is urbanizing like mad (1 per cent a year) on top of 0.5 per cent population growth. At those rates, 50 million empty houses doesn't look so big. Whether there are other factors that prevent people taking up those apartments isn't clear though. Also I guess it depends on the financial situation of the developers. If there is a lot of leverage on those assets that are sitting idle and not being sold or generating income that must be hurting someone. Or perhaps the state owns them directly or indirectly, so ROI doesn't matter so much in the short term? I don't know.
- vorg 15y agoRetail apartment buyers in China only borrow half the capital from the banks, but the developers who build them borrow all of the money from the bank, interest-free, based on their "guanxi" relationships with bankers. So instead of reducing prices on unsold apartments, popping a bubble, they and the banks collude to just let the empty apartment buildings sit there empty for years, until they sell. The property bubble might not burst for a long time. Of course there's also social pressure on young unmarried males to buy apartments, because the girls won't marry them if they don't. I predict the banks will slowly lower the capital requirements, down to 30%, then 20%, then 5%, eventually to 0%. After that will come a Chinese version of CDO's, then, perhaps decades later, the bubble will burst.
- jwhite 15y agoVery interesting, thanks!