- cross-posted to:
- worldnewsnonus@lemy.lol
- cross-posted to:
- worldnewsnonus@lemy.lol
The industry that has traditionally powered about a quarter of GDP has been in a downward spiral that policymakers have struggled to halt
All across China, from Beijing in the north, to Shenzhen in the south, millions of newly built homes stand empty and unwanted. There were nearly 391m sq metres of unsold residential property in China as of April, according to the National Bureau of Statistics. That is the equivalent of Manchester and Birmingham combined – and then some – sitting as vacant, unwanted property.
This glut of idle property has caused a headache for the government, shaken the world’s second largest economy and raised tensions over the purpose of housebuilding in a nation where property investment had been viewed as a safe bet.
Since the real estate sector was sent into a tailspin in 2020, caused by the pandemic and a sudden regulatory crackdown, the industry that has traditionally powered about one-quarter of GDP has been in a downward spiral that policymakers have struggled to halt.
The crux of the problem is that, with shaky faith in the economy and big property developers failing to deliver on paid-for apartments, potential homebuyers are keeping their money out of the market.
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They are unwanted for the price that is wanted but for free I bet they could fill them up in a jiffy but that would make them dirty filthy communists and china don’t want that ??? /s
Ehhh, you would think that. However, China currently has more housing than people. I think at the moment the excess housing in the country could home an extra 150m people.
You can knock them for ignoring basic fundamental economic ideas like supply and demand, but it’s not like they have a large homeless population being unsheltered.
This is, again, just a plainly incorrect take. Basically everyone in China is housed, yes, but a vast proportion of them still live in rural villages. The rural-to-urban transition does need to be planned for, and it’s been a huge factor in China’s real estate market. China’s urbanization rate today is 66%, compared to 75% in Russia and 83% in the US.
I don’t really see how your rebuttal conflicts with what I said? Unless you are claiming that developers were building housing for an eventual urbanization project that’s going to migrate 150m people to cities within the next year or two…
These are still real estate companies we’re talking about. They aren’t wanting to be left holding the bag for years while their investment properties dry rot from prolonged vacancies.
Urbanization is expected to hit 75% by 2030… This is analysis corroborated by Morgan Stanley and others, so, unironically, yes.
That’s still a bit of a long time for developers to have their money wrapped up in empty apartment complexes. Large buildings like that can start having major issues after months of vacancies, let alone years.
I think it’s still more likely that developers’production exceeded immediate demand than it is for them to have planned for them to be vacant for years.
Either way, it’s still not an economically sound idea. I think if they had planned for this, it wouldn’t have hit the real estate market as hard as it has.
Basically, government officials knew that at some point they needed to aggressively overbuild real estate capacity in order to meet the urbanization demands. I think they predicted an incorrect curve: whereas they perhaps anticipated that urbanization would follow a trend more like Korea (74% at a similar stage in their urbanization trajectory), instead China is following a curve similar to Taiwan (~66%). A mistake in policy, yes, but it has localized effects.
Plus, I think you’re missing a far more essential point: China doesn’t give a fuck if every real estate developer goes bankrupt. That’s just a cost of doing business. Instead, China’s just swooping in and buying up distressed assets to turn into public housing. Homeowners aren’t left holding the bag: developers are.
Plus, I think you’re missing a far more essential point: China doesn’t give a fuck if every real estate developer goes bankrupt.
Just because they operate a mixed economy doesn’t mean they can ignore material realities. Investments going unrealized arguably have more negative outcomes for more socialized markets.
Instead, China’s just swooping in and buying up distressed assets to turn into public housing. Homeowners aren’t left holding the bag: developers are.
You can’t wring blood from a stone. Its not like it’s just the developers cash being used to build the housing, there are subsidies and investments from banks, which are owned by the government. So if a project goes under, the best case scenario is that they buy it back to get some return on investment, but that’s still robbing peter to pay peter. It’s just not sustainable, especially if you aren’t making wind on your other plans like urbanization.
Does china house them or does china do something else with them?
Yes.
Well they could use them as makeshift landfills for their garbage EVs, but people cannot live in them as there is no water, gas or electicity anywhere. And that’s only half the problem because there are far more empty shells for an excuse of a home than there are people to populate them. It’s one giant ponzi scheme that got completely out of hand over a decade ago and the government struggles a lot to restrain and keep it going at the same time so it doesn’t collapse.
yeah it is funny that an article talking about empty, unwanted units also talks about not delivering for poeple that bought them. Its a wierd situation.
What China needs to do is figure out a way to export this property to America, which needs more affordable homes.
That’s doable, right?
The construction quality is… shall we say, not great. Pretty sure lots of it would not pass code in the states - let alone Europe, Korea, or Japan.
That’s okay, I don’t think we have teleportation technology yet anyway.
That shouldn’t be a problem, most landlord owned properties don’t pass code here either
at the time it was built?
Hm. That didn’t work out too well. Maybe they could switch over their economy to be based on tulip bulbs? That’s bound to work forever.
Can’t they just give the homes to people to fulfill their Communist agenda?
This is the best summary I could come up with:
Since the real estate sector was sent into a tailspin in 2020, caused by the pandemic and a sudden regulatory crackdown, the industry that has traditionally powered about one-quarter of GDP has been in a downward spiral that policymakers have struggled to halt.
The crux of the problem is that, with shaky faith in the economy and big property developers failing to deliver on paid-for apartments, potential homebuyers are keeping their money out of the market.
Tao Ling, an official with the PBOC, said that local state-owned enterprises would be encouraged to use the funds to buy “reasonably priced” homes and turn them into affordable accommodation.
“While these local players are desperate to prove they can continue to deliver growth, they will be struggling with other priorities and unwilling to add to their debt obligations for investments that won’t provide any long-term profits.”
The authorities “know there isn’t really market demand” for the acres of unsold property, says Alicia García-Herrero, the chief economist for Asia Pacific at Natixis, an investment bank.
García-Herrero expects that there will be more fiscal reform to boost the impact of the policy, likely at the long delayed meeting of the Chinese Communist party’s central committee in July.
The original article contains 958 words, the summary contains 202 words. Saved 79%. I’m a bot and I’m open source!
I’m confused. Why would policymakers want to halt the decline in real estate as contribution to GDP? GDP growth is still 5% YoY even as the real estate industry is in freefall. Big Chinese developers want kaput, and still GDP growth is projected to be 5%. Basically: who cares? Sector rotation is normal, isn’t it?
Apparently a lot of people’s investments are tied up in those properties so if they values tank they’ll lose everything. Normally I wouldn’t sympathize at all but Chinese people have very limited options to invest their money and grow their savings. They can’t just easily invest in the stock market. Property was one of the ways of doing this. If enough people lose enough money , the good old mandate of heaven gets its foundations rocked.
Again, so? China’s household savings rate is notoriously high because Chinese consumers do not consume at Western rates. Real estate should not be an investment and the people that got burned knew what they were signing up for. Everyone can easily invest in the stock market, but stock market returns do not go up infinitely because value is extracted by the government rather than passed down to shareholders. The safest investment has always been bonds, and municipal bonds in particular often have outsized returns relative to inflation.
Anyway, the market corrected 30% (after rising hundreds of % over the past decade), some people who could afford multiple homes lost some money, woe is them.
If you have a single home, you’re in the same position you always were: you can sell your house and buy a new one, because at the end of the day you need to live somewhere. If you have multiple homes, you took a sizable loss, but you were buying up multiple homes and nobody likes landlords.
Basically, you’re saying that the rich should get richer at the cost of housing access for the poor. Not very socialist of you, eh?
Basically, you’re saying that the rich should get richer at the cost of housing access for the poor. Not very socialist of you, eh?
Have you considered writing comments while not in a state of apoplectic rage? That way you might actually make a reasonable point instead of whatever this word-vomit is.
Aww, guess you ran out of counterarguments. That’s ok.
Real estate should not be an investment and the people that got burned knew what they were signing up for.
I’m not sure how to answer this. We’re talking about empty places. You think these people were buying and building these places to lose money? As you point out, it’s been a great investment until now. Now the bubble the government created is bursting, which is the problem the article is talking about.
The people who invested knew that they were buying investment properties. The developers sold based on urbanization projections that did not follow through, the investors bought it up, and now the developers lose money and the investors who could afford to buy multiple homes lose money.
How terrible.
(As an aside, I think China’s reported urbanization rate is below reality because a lot of places that would be considered urban in Europe or North America are listed as rural in China). Under China’s definition, living a 15 minute drive from the center of a 200k-population city could be a “rural home.” I think that China’s urbanization numbers sent a false signal to developers that more development was needed, when in fact China was much further along the urbanization curve than the numbers indicated.
I don’t care that they are losing money, but the point is that it represents a threat to the stability of the government.
Developers losing money and consolidating property assets in the government? What, exactly, does this threaten?
GDP growth? It’s been a 1.5% headwind, and China is still blowing through GDP projections.
Climate change? The collapse of the construction industry has been a huge net positive for emissions reductions.
Housing prices? Those have been going down.
Savings? Only insomuch as if you intended to own multiple homes (that is, you’re the landlord class). Otherwise, you still own a single home that you need to live in.
Maybe you should ask the Chinese government why it’s a big deal, because they are the ones who have been propping it up and are attempting to do so again now. It’s all right in the article.
you say “property should not be an investment”.
that’s lovely. that’s fine.
He didn’t disagree with you, so stop acting like he did.
He said that it’s one of the few / the easiest way for them to “invest” their money. Not save.
If your entire argument is that the Chinese stock market is as easy to access and use as the housing market, I’d want you to be very sure, and clear. Including bonds.
Ultimately, it looks like you just want to fight, but no-one is fighting you.
Small dog syndrome.
I, too, like evaluating investments based on “how easy is it for me to make” rather than “what is the risk/return.”
you do? I’m very happy for you then. no-one else is evaluating anything here, so I’m glad you’ve found something to occupy yourself with.
Is this a common thing in the US? Evaluating investments based on how easy they are to make, independent of their PnL?
I wouldn’t know. you’re the only person evaluating investments that I know of.
