Ghost Cities: Gargantuan Chinese Real Estate Bubble

[quadz]

http://www.cbsnews.com/news/china-real-estate-bubble-lesley-stahl-60-minutes/  (12 minutes)

Bizarre: Upwards of 10 to 20 ghost cities are being constructed in China per year, full of high priced apartment complexes and vacant shopping centers--apartments which members of China's middle class have been purchasing as "investments", but which are too expensive for the poorer population to afford.

Apparently the government has been subsidizing or at least heavily encouraging continued development to keep the bubble from bursting so far--and since housing prices have continued to rise over the past decade or more, families who can afford them continue to view them as investments. A middle class family might own half a dozen different empty apartments in various new cities.

Yet the Chinese villagers being displaced by the millions to make way for these new high-rise cities subsist on something like $2 per day, thus have zero chance of being able to afford a $60,000 apartment in a complex that now sits where their village used to be.

Further, developers are taking out massive loans to build the next new city. So when the bubble does burst and families with all their savings locked up in half a dozen empty apartment buildings see the value of those holdings start to plummet, they'll be scrambling to sell, and developers will be stuck with partially finished new cities but suddenly no buyers for their newest batches of "investment" apartments.

Looks like it's on a path to make what happened here in 2008 look tiny by comparison.

[Whirlingdervish]

let's pray they didn't repackage those mortgages and sell them as supposedly foolproof highly rated investment "products" like they did here.

[yahoo]

China is like a bubble waiting to burst. Whats scary is that all info is controlled by the Governement. That's why the world don't have the slightest idea on what really its economic status. Its economy may be huge and growing but so its liabilities.

[|iR|Focalor]

A middle class family might own half a dozen different empty apartments in various new cities.

If the 6 apartments they own are empty, then they obviously live somewhere else, for a total of 7 properties that they are paying for. Let's say that the half a dozen estimate is still too high and cut it in half to 3. They own 4 properties. And they're considered "middle class"? Holy sheep shit, man. Most people currently considered "middle class" in the US are doing damn good to keep up with the payments on the ONE property they have.

So I dunno that you could truly call these people "middle class". Who fuckin' knows what to think with whatever reports come out of China. That government wants to have their communist dictatorship cake and still eat the gooey sweet capitalist one too.

The housing bubble shit is just one of many vivid examples of why 100% FREE free-market philosophy isn't a viable long term economics policy. I don't mean to talk shit about capitalism like some 20-something college yo-yo who don't know shit about the real world, but it's pretty obvious that if you allow these huge big business folks to do whatever they please, they're gonna swindle and loophole their way through the law until they make their windfall profits with no concern for how it effects anyone else.

So if that's the kinda shit they're pulling over there, yeah, their economy is gonna come down with a giant explosive case of diarrhea. I just hope the rest of world is prepared for the fallout from it. Shit's tense and teetering on the edge most everywhere. Sounds like a great catalyst for further escalation of tensions throughout the world between the major economic players. Some nations might be in a nice cozy loving relationship with one another, but like any romantic relationship, you go throwing money problems into the mix and someone can end up getting a steak knife through their leg during an argument at the dinner table.

[Barton]

Buying a house in China is nothing compared to paying for their children's university fees in America, to which they have spend about double or even triple the amount of money on tuition fees that a resident would pay. Some of these middle class families, I think, use their own life savings in order to do this.

[|iR|Focalor]

That's true. For the longest time, Emory University in Atlanta, a pretty big and notoriously expensive medical school, has been chock full of tons of ching-chong chinamen. *gong sound*

[Waffle Whiffer]

I don’t know if this is true. But a Korean (south) investor I met last year said that the number of millionaires in China equals the total population of the U.S. Pretty crazy if true.

[[BTF] Reflex]

Even crazier if they all have their money tied up in the housing market?

Wouldn't worry,  if China's economy starts to tank they can start selling off their U.S. bonds.

[Whirlingdervish]

I don’t know if this is true. But a Korean (south) investor I met last year said that the number of millionaires in China equals the total population of the U.S. Pretty crazy if true.

Seems dubious.

They have a population of approximately 1,350 Millions.
The US has 300+ million as of the last census.

That would make nearly a quarter of their population millionaires.
According to wikipedia, their average per capita GPD in USD is in the 6,000 dollar range.

They must be counting in some other form of currency than USD to get to the term "millionaire".

[yahoo]

I don’t know if this is true. But a Korean (south) investor I met last year said that the number of millionaires in China equals the total population of the U.S. Pretty crazy if true.

Seems dubious.

They have a population of approximately 1,350 Millions.
The US has 300+ million as of the last census.

That would make nearly a quarter of their population millionaires.
They must be counting in some other form of currency than USD to get to the term "millionaire".

That's exactly what I was saying. There is no reliable and official information where someone can grasp the actual condition of China. The Chinese communist Party regulates the statistics and news. Basically, they censor information that they deemed bad and will taint their image and pump-up those that will make them look good.

1. For sure that there are an impressive number of millionaires and billionaires in China but to think of it that for every 1 rich Chinese there are hundreds if not thousands of who are struggling in poverty.

2. If I am not mistaken, a significant numbers of those so called rich Chinese are either members of the Party or if not cronies of the Party.

[Whirlingdervish]

I did the math and if their 300 million individual "millionaires" took every penny of the Chinese GDP for a year as income (approx 9.2 trillion according to an average of a few different sources) they'd still only make about 30k USD a year.

At that rate, they'd need to live a very long time to become millionaires, even if they didn't buy anything or support themselves.

Something's funny with that claim.

[quadz]

Something's funny with that claim.

Indeed. As of 2013, "China Now Has More Millionaires Than Any Country but the U.S."

http://blogs.wsj.com/chinarealtime/2014/06/10/china-now-has-more-millionaires-than-any-country-but-the-u-s/

There are now more millionaires in China than in Japan, as the wealthiest Chinese reaped huge returns from shadow-banking-related financial products, a new study revealed.

China had 2,378,000 millionaire households in 2013, a rise of 82% from the previous year and almost double the 1,240,000 millionaire households in Japan, according to the Boston Consulting Group Global Wealth 2014 report unveiled on Tuesday.

China’s millionaire population is now the world’s second-largest, trailing only the U.S., which boasted 7,135,000 millionaire households in 2013.

BCG defines a millionaire household as those with $1 million in total liquid wealth, including stocks, cash and other financial investments but not real estate, collectibles or luxury items.

(Kinda interesting that real estate isn't counted.)

P.S. some info on what "shadow-banking-related financial products" means in China:

http://qz.com/175590/five-charts-to-explain-chinas-shadow-banking-system-and-how-it-could-make-a-slowdown-even-uglier/

[Whirlingdervish]

I'd guess that counting real estate would require quite a bit of fumbling around setting approximate values for every property people owned, most of these people wouldn't accurately report what property they held, and the values/qtys would change so frequently that nobody bothers.

[Waffle Whiffer]

I don’t know if this is true. But a Korean (south) investor I met last year said that the number of millionaires in China equals the total population of the U.S. Pretty crazy if true.

Seems dubious.

They have a population of approximately 1,350 Millions.
The US has 300+ million as of the last census.

That would make nearly a quarter of their population millionaires.
According to wikipedia, their average per capita GPD in USD is in the 6,000 dollar range.

They must be counting in some other form of currency than USD to get to the term "millionaire".

The guy was a character and we were intoxicated.  He also told me he was an ex Korean fighter pilot, had $100 million he had to invest in the U.S. for his Chinese clients and just bought a $300,000 horse for his 12 year old daughter. 

[Whirlingdervish]

Sounds like my kind of guy!