A housing development in China.
Reality and economic analysis in China seem to have grown far apart.
But, given confusion even within the Chinese government between economic data and investment promotion, ideological polarization over simple questions like “Is the economy growing?” may be inevitable.
To some of us, it is almost unfathomable that the Wall Street Journal, in a recent report, could write: “There is currently a supply crunch of homes in major cities like Beijing and Shanghai, which is in turn leading to fast-rising property prices” or that Thomson Reuters could ink the sentence: “China needs more housing.”
To some of us, it is almost unfathomable that the Wall Street Journal, in a recent report, could write: “There is currently a supply crunch of homes in major cities like Beijing and Shanghai, which is in turn leading to fast-rising property prices” or that Thomson Reuters could ink the sentence: “China needs more housing.”
The reality of eyes and ears and common sense is quite different.
Over the last two years of traveling constantly in China, I can say that I have not seen a single city, town, or hamlet without massive empty housing stock.
Over the last two years of traveling constantly in China, I can say that I have not seen a single city, town, or hamlet without massive empty housing stock.
A colleague, on two trips crossing about 1,500 kilometers overland, said that he was not out of sight of empty buildings even once.
Up by the Siberian border, the town of Manzhouli has decided to become a tourist resort and built thousands of empty “villa” developments.
In the southern mountains of Yunnan, a colleague took video footage of 15 kilometers unbroken of empty highrises.
The ghost developments stretch along Beijing’s southern Fourth Ring and through Shanghai’s Pudong and Xuhui.
The East District Zhengzhou looks like a post-apocalyptic landscape.
The new districts of Harbin could earn some revenue as sets for a remake of I Am Legend.
When I have been able to collect a count of all housing now available for sale, not counting projects already sold but not occupied, cities seem to average out at about 25 square meters of new housing per individual in the city, or one new dwelling for each four people.
When I have been able to collect a count of all housing now available for sale, not counting projects already sold but not occupied, cities seem to average out at about 25 square meters of new housing per individual in the city, or one new dwelling for each four people.
Yinchuan in Ningxia has around 200,000 units on the market, with a population of 800,000 in the city proper and 1.2 mln in the extended city.
As a comparison, the United States sells about 650,000 new homes per year.
The small city of Tieling in Liaoning Province has a reported 10 mln square meters of available space for a population of 400,000.
Kunming, Xian, Chongqing, Hefei, Hangzhou, Haikou, Urumqi, Changchun: there is no city in the country without stretches of terrifyingly empty towers.
For those who do not believe travelers’ tales, there is the Chinese government’s own report, from 2010, concluding that home ownership rates in China were then nearly 90%.
For those who do not believe travelers’ tales, there is the Chinese government’s own report, from 2010, concluding that home ownership rates in China were then nearly 90%.
This compares with a world average of 63% and a U.S. average of 65%.
The report also concluded that 15% of Chinese people own more than one housing unit.
In general, the smaller the city, the higher the proportion of multiple-unit ownership.
In general, the smaller the city, the higher the proportion of multiple-unit ownership.
Home ownership rates in one mid-size city in Hebei Province, according to a local developer, is 200%.
A developer in Jinzhou, Liaoning said that at least half the city’s population owned two or more units.
In many cities, white-collar employees, especially in banking and finance or property, routinely have four or five units.
In fact, the unique class of person who does not own a home in China is the migrant worker who is supposedly the target of the nation’s “urbanization.”
In fact, the unique class of person who does not own a home in China is the migrant worker who is supposedly the target of the nation’s “urbanization.”
Any government official knows what few external analysts seem to: that Chinese urbanization is not a migration of populations.
Instead, it is the re-designation of a piece of agricultural land to “urban” so that it can be sold for a much higher value.
Urbanization Chinese-style, meaning urbanization in situ, forces agricultural populations from their land and into nearby highrises, where they are employed as maintenance workers or simply given extras units to rent out for income—should they be able to find renters.
Urbanization thus destroys jobs rather than creating new employment.
In fact, at this point, we can safely say that the crazed utopian dreams that have now been committed to steel and cement in China surpass anything Mao dreamed up during the Great Leap Forward, when China only had pots and pans and hoes to toss into the furnaces.
In fact, at this point, we can safely say that the crazed utopian dreams that have now been committed to steel and cement in China surpass anything Mao dreamed up during the Great Leap Forward, when China only had pots and pans and hoes to toss into the furnaces.
Now, China has the iron ore resources of the whole world.
Now, the oversupply of housing seems to be converging on a single number that is roughly equivalent to 25 square meters per person, or units enough to re-house the whole population of an area.
Now, the oversupply of housing seems to be converging on a single number that is roughly equivalent to 25 square meters per person, or units enough to re-house the whole population of an area.
Prices also are converging, on a range of 5,000 Renminbi per m2 to 10,000 Renminbi in each city, depending on how luxurious the housing but regardless of where the city is or what level of income is average for the population.
Tianshui, a poor city in Hebei that was a mere village a decade ago, is selling at 10,000 m2 just as are apartments in the relatively wealthy cities of Shenyang and Harbin.
What this means is not that housing in China has become a new type of tradable and fungible commodity something like wristwatches or jewelry or indeed piles of copper or gold.
What this means is not that housing in China has become a new type of tradable and fungible commodity something like wristwatches or jewelry or indeed piles of copper or gold.
The purchased units are left empty, because renting them would depreciate the value of the real estate; living in the housing is actually an impediment to realizing its value.
The Chinese property boom has been the most powerful tool short of revolution for concentrating wealth in the hands of local governments.
The Chinese property boom has been the most powerful tool short of revolution for concentrating wealth in the hands of local governments.
The problem is, the individual owners of the housing mostly do not yet know that the swollen asset they are sitting on is not worth anything near its quoted price.
They, as a result, are much poorer than they now think.
It is impossible to know with certainty when the property bubble will burst, but burst it will, and anyone visiting China five years from now will be lucky to find prices at 60% of the current values.
It is impossible to know with certainty when the property bubble will burst, but burst it will, and anyone visiting China five years from now will be lucky to find prices at 60% of the current values.
Governments are the key instigators of the property mania, which in the end, represents expropriation of the people’s savings.
Yet this is not the only tragedy associated with housing: the great paving over has replaced functioning villages and communities with soaring cement towers in which families sit, alienated, and now often unemployed.
Yet this is not the only tragedy associated with housing: the great paving over has replaced functioning villages and communities with soaring cement towers in which families sit, alienated, and now often unemployed.
In the coming decade, these “urbanized” developments will become crucibles of crime and poverty, plagues of which Chinese cities had been blessedly free.
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