China's Ghost Cities

March 30, 2011 6:44 AM

China's Ghost Cities (via)
posted by nam3d (48 comments total)

previously
posted by warbaby at 6:54 AM on March 30, 2011

Why are they building such solid looking apartments for ghosts? Let those ghosts settle with some simple plywood and plastic sheeting if they insist on lingering in this earthly realm.
posted by Burhanistan at 6:56 AM on March 30, 2011 [10 favorites]

So obviously this has been floating around for a while, and I personally think this is why demand for commodities has gone so crazy, but - but - the number of vacancies of 64 mil actually isn't as insane as it sounds. Current vacancies in the US are about 20 mil, and normal frictional vacancy is about 10 mil. When you consider China has 2 bil in population to the US' 300 mil the number sounds more in context.

That said it does seem affordability is an issue. Who knows. China isn't immune to the laws of supply and demand, but the government seems awfully happy to waste shit loads of money to keep people happy, and as long as they run a massive current account surplus its all fine and dandy.
posted by JPD at 6:58 AM on March 30, 2011

These have always fascinated me. There's a similar, but much smaller-scale phenomenon in Ireland: ghost estates, where people built huge (by Irish standards) housing estates during the construction boom only to see them go empty once the recession hit. Some of them are downright creepy: I remember being in one where only about 10% of the houses were occupied and most of the shops were completely empty. In the evening, you could easily convince yourself you were the only person there.
posted by anaximander at 6:58 AM on March 30, 2011

Urgh. Didn't we go over this particular bit of prejudice already?
posted by public at 7:01 AM on March 30, 2011

Urgh. Didn't we go over this particular bit of prejudice already?


I'll quote you from the other thread

I do wonder how much of this story is casual racism... Surely in a country with 2 billion people when you are trying move people into cities and out of tiny agricultural villages having millions of square feet of unused housing space for them to use is a good thing?


Then I'll address the more interesting point in the piece - price is the issue, not volume. That's why these places aren't filling up. The piece has an array of interviews with Beijing folks all of whom want to buy a home, but the price of these new constructions is far far out of reach for someone earning the median wage.

So yes, if these units were being built at affordable prices it would be a very good thing, but they aren't and that's why vacancy rates are so high.
posted by JPD at 7:09 AM on March 30, 2011

BTW to but the vacancy number for the US and Ireland in context - the US is about double normal frictional vacancy, Ireland is about 3x normal frictional vacancy. Spain would be interesting to see - but I have not seen it.
posted by JPD at 7:11 AM on March 30, 2011

As far as I can tell, the underlying cause is that the allocation of state-owned land is controlled by a class of officials in cahoots with the top-level developers (the defining feature of the emerged elite class in China is its leverage of political capital) in a construction sector with absolutely rococo levels of sub-contracting, so that even if lower down the chain money is lost by mid-level players, construction gangers and principally the workers who build them, there's almost always fat sums to be made at the top. That's drawing the vast sums of cash floating about from various other sectors of the economy with few investment outlets that offer the same return for so little actual work.
posted by Abiezer at 7:12 AM on March 30, 2011 [1 favorite]

I have a horrible bit of prejudice myself -- if more people had played SimCity 2000 15 years ago, you wouldn't get this.
posted by TheAlarminglySwollenFinger at 7:14 AM on March 30, 2011 [5 favorites]

Correcting myself, I am aware china has about 1.5 bil in population
posted by JPD at 7:18 AM on March 30, 2011

Why are they building such solid looking apartments for ghosts?

And they already have Fengdu.
posted by Abiezer at 7:28 AM on March 30, 2011

That's a decent piece of reporting, in my view, and deserves to be viewed before the grindy axes come out.

It's clear from the report that this is not just a case of random apartments being empty; there are entire cities with mostly empty apartments and mostly empty shopping centres. The whole thing becomes a vicious cycle because nobody wants to live in a place where there's few shops, and nobody wants to open a shop where there's few people. (The toy shop owner says he once went five days without making a sale. Five days! I wish they'd asked him how he could still pay the rent.) I also suspect, though the report doesn't go into it, that there's very little employment in these cities, which is of course another barrier in getting people to move to them.

So on the one hand, we have nine people living in a two-bedroom apartment, and we have ten tiny studio apartments that share one sink and one toilet between them. On the other, huge empty highrises that are completely out of reach of the average worker, because they cost between twelve and sixteen times the average salary but are 50% down and must be paid off within three years.

All hail the mighty GDP.
posted by Georgina at 7:28 AM on March 30, 2011

I don't think the central government encourages this sort of thing for GDP reasons, but rather employment. That's why it seems reasonable to expect they'll just knock these things down and build them again.
posted by JPD at 7:41 AM on March 30, 2011

a vicious cycle because nobody wants to live in a place where there's few shops

I've been to areas of China like this and know this is a big part of it. In Tianjin, for instance, huge residential areas in the center of the city were being demolished and the residents were given money to buy apartments elsewhere. The only places they could afford were well in the outlying suburbs of the city. I talked to one person from the area and he complained about the new location. There were no shops, there was little public transportation (anyone who's ridden the single crowded bus line to outlying areas of China's big cities know what a pain this is), and there were no jobs. The displaced people were being forced to move to an area that, while the apartments might be more modern and spacious, would require hours more traveling each day for job, school, food, and other shopping. Not to mention that all the trees are small and there are far fewer parks and common areas in new developments than in city centers.

Maybe in a few years the infrastructure would build up, but that's a long wait. For instance, I saw Xianlin, on the outskirts of Nanjing, grow from a few sellers in tents to a mall or two, some restaurants, and a couple of grocery stores. But a grocery store isn't a wet market, and very few people in China prefer to buy produce at a grocery store over a wet market. Transportation was okay in Xianlin, but only because the subway to the area had been planned for at least a decade. The current plan for the subway goes 50 or so years into the future, and real estate advertisements take great pains to remind prospective buyers that some day, eventually, if the plan is followed, your apartment will be steps from the subway.

These outlying areas of major cities are arranged quite differently than the older areas of cities, too. As in the Xianlin case, there are wide boulevards, well-manicured foliage along the roadways, sidewalks that can actually be used. These seem good. But the distances between apartment building and place to buy food can be miles in these new areas, compared with just going down the block to a market in the city center. These new areas are built with cars in mind, but as is the case with the cost of vacated apartments, cars are often well out of reach of the median income, even when the government controls the price of fuel.
posted by msbrauer at 7:45 AM on March 30, 2011 [6 favorites]

It's more complex than that even I think JPD - the central government will issue directives condemning and ostensibly cracking down on the phenomenon (especially the land grabs and sell-offs) or will invest in a few headline affordable housing projects in big cities while simultaneously failing to deal with land issue with any vigour and creating perverse incentives with the political-economic targets they set for local governments. If it were about employment you'd not have seen the massive casualisation of the construction sector in the late 90s/ early 2000s.
posted by Abiezer at 7:46 AM on March 30, 2011

Oh, one other thing I wanted to mention.

Home ownership is extremely important in Chinese society. Many Chinese people feel cultural pressure to own a home as a prerequisite to marriage (second paragraph in this China Daily blurb, for instance). Home ownership rates are very high in mainland China, as well. I've seen (specious) reports up to 80%, but it's at least substantially higher than many other communities (see the abstract of this pdf; mainland and Taiwan home ownership is 18 percent higher than native white households in that study). All of this is to say that I could imagine one reason for housing vacancies is that, for many, the only culturally acceptable way to live in an apartment is to purchase it. When purchasing isn't an option, real estate speculators in other countries and cultures would likely start renting out their holdings, but that isn't an option here, either. When I was doing some research a couple of years ago on the subject, I remember reading that the situation had gotten so bad for some developers in China that they had petitioned their local government authorities to allow them to sell their holdings at a loss. Can't find a link to that now, unfortunately.
posted by msbrauer at 8:17 AM on March 30, 2011

There is a pervasive belief in China that real estate prices will never fall, so investors have scooped up huge tracts of prime condominiums, many of them new construction, in desirable locations of every major city.

Here's where it gets weird: These condos are all empty. Many of them are unfinished: no appliances, no interior paint, maybe no drywall. Why don't they rent them out? Because being "used" devalues the investment. The Chinese do not like used cars, or used clothes, or used CDs, or used condominiums.

You might think that all these empty condos would cause the cost of buying one to fall, but that's not the case: There's still a housing shortage, because they're not for sale. Investors are sitting on them, waiting for prices to rise.

Weirder yet, this demand for empty housing investment is a driving factor in new development. Contractors build new condos with the intent of selling them to investors so they can sit empty.

So the consequence is that Chinese cities are filled with these things that look like condominiums, but are actually brick-and-mortar savings accounts that just occupy space and look pretty.
posted by qxntpqbbbqxl at 8:27 AM on March 30, 2011 [3 favorites]

so what makes chinese prices go down? In the US it was finally affordability hitting a level that even the most absurd of financially engineered mortgages couldn't keep in reach of the average home buyer.
posted by JPD at 8:32 AM on March 30, 2011

so what makes chinese prices go down? In the US it was finally affordability hitting a level that even the most absurd of financially engineered mortgages couldn't keep in reach of the average home buyer.

I don't think crazy lending is a factor in the Chinese market. Most people like to buy their real estate outright.

My theory is that some event will cause prices to fall a little bit in one of the major cities; a glut of new construction could do this. Some investors get nervous and try to sell before prices fall further. This becomes a rush to sell. The local housing market crashes. Investors in other cities panic, fearing the same will happen to them, and it is a self-fulfilling prophecy. The whole Chinese market collapses like dominoes.

Savvy investors take advantage of bottomed-out housing prices and buy up huge swaths of empty condos. Rinse and repeat.

Disclaimer: I'm just an armchair economist. I don't really know what I'm talking about
posted by qxntpqbbbqxl at 8:46 AM on March 30, 2011

yeah, its the lack of a mortgage market that leads one to wonder.

But at some level there has to be some sort of crazy lending going on. Savings rates are high in china, but not high enough to support all of those units being bought 50% cash, 50% three year amortizing loan.
posted by JPD at 8:50 AM on March 30, 2011

they had petitioned their local government authorities to allow them to sell their holdings at a loss

Interesting. Maybe this explains why a friend of mine's parents were paid a debt owed to them by a developer with three new-construction condominiums. If developers are unwilling or unable to sell at a loss, but need to raise capital, then perhaps they can just use the real estate itself as a large-denomination currency!
posted by qxntpqbbbqxl at 9:01 AM on March 30, 2011

"A landlord is a person who owns land, does not engage in labour himself, or does so only to a very small extent, and lives by exploiting the peasants. The collection of land rent is his main form of exploitation; in addition, he may lend money, hire labour, or engage in industry or commerce. But his exaction of land rent from the peasants is his principal form of exploitation."

HOW TO DIFFERENTIATE THE CLASSES IN THE RURAL AREAS

I find it fascinating that 3 generations after Mao liquidated landlordism, it has crawled right back into fashion. Same thing has happened in Vietnam, too, I gather.

The whole thing becomes a vicious cycle because nobody wants to live in a place where there's few shops, and nobody wants to open a shop where there's few people.

and:

So yes, if these units were being built at affordable prices it would be a very good thing, but they aren't and that's why vacancy rates are so high.

Actually, the deal here is that these ghost cities are being built far from industrial centers.

As for the economic trajectory of all this, I think it's possible that wage inflation will in fact make housing investment pay off. Maybe not for the "ghost cities" but all this investment out in the periphery implies even more fierce investment in actual desirable areas.

As the yuan strengthens, $900 a month will become $2700/month soon enough. The Chinese will be able to buy more with their yuan, and this may spur economic development in some areas (while taking a toll on export sectors I guess).

China . . . India . . . these are not normal places and I do not pretend to understand them.

But I do know that land will always be too expensive. Fixed supply & unbounded demand.
posted by mokuba at 9:31 AM on March 30, 2011

Found an article that sheds further light on my point above about investment sloshing into a sector still controlled by administrative means. Author is widely published on Chinese urban development issues.
posted by Abiezer at 9:33 AM on March 30, 2011

huh? the strength of the Yuan has nothing to do with housing affordability. Both rents and apartment prices are in renminbi.

And even if they were in industrial centers - the prices are still too high.

Yes Wage inflation could make them more affordable, assuming you don't have price inflation at the same time as you have wage inflation - and if you do have price inflation, but no asset inflation then owning those apartments is a terrible investment.
posted by JPD at 9:36 AM on March 30, 2011

Abiezer - that's a good article but this quote sort of outweighs everything:

Rental yield in China is low, and does not justify buying a house to rent it out. We do not see the spread of "buy-to-let" in China. In fact, property owners don't rent out their second and/or third homes resulting in a high vacancy rate. Investment in property is made mainly to make profit from an increase in value.

There is a lot of cognitive dissonance in that statement. Yields are fungible and mean revert.
posted by JPD at 9:40 AM on March 30, 2011

I'm going to move into these apartments, and roleplay as Will Smith in I am Legend.

In all seriousness though, thank you for this. Very interesting.
posted by Evernix at 9:54 AM on March 30, 2011

the strength of the Yuan has nothing to do with housing affordability. Both rents and apartment prices are in renminbi.

I think there are some parallels here with Japan, which moved from a Y360 economy to a Y150 one, 1971-1990. Monetary strength has follow-on effects on domestic consumption and "wealth".

Eg. the yuan tripling will, ceteris paribus, reduce China's petroleum costs by a lot (but if producers cannot meet this new demand then the ceteris paribus will fail).

A strong yuan will have a lot of economic effects as China begins to muscle in on global wealth production opportunities -- natural resources and manufacturing labor pools -- it will thus serve to bring more wealth into China, well, at least into its upper classes.

I am not a macroeconomist so this is just my impression, but later this century, with the yuan at parity with the dollar, the beauty parlor laborers might be taking home Y9000 a month.

This Y9000 won't have the buying power of $9000 today, but neither will $9000, then, either.
posted by mokuba at 10:09 AM on March 30, 2011

Another one from same author here, JPD. He repeats his point about rental incomes being too low and says more about the desire for asset appreciation as a hedge against inflation. TBH all a bit over my head and I'd be interested in more from you.
Also note that his line "The tricky issue is that the housing market is tightly embedded in the local growth-oriented regime" fits with the general picture I'm attempting to sketch in my usual half-arsed fashion.
posted by Abiezer at 10:11 AM on March 30, 2011

America has vast quantities of empty homes too. And not just due to the financial crisis. What's the difference between houses built and purchased on unworkable credit agreements and thousands of houses built for cash and left unused due to a lack of unworkable credit agreements?

The problem is bigger than just China.
posted by public at 10:13 AM on March 30, 2011

mokuba - That doesn't really make any sense. If the beauty parlor person is making 9000 rmb a week, then the cost of a hair cut has gone up so you've got inflation. If you've got inflation in wages and then rents grow into the current home prices that's a great glidepath for the economy, but it also means that in real terms the investors in the apartments (and the general consensus seems to be that they are owned by investors)or the banks who made the loans, will have gotten absolutely crushed because the value of their asset has not gone up with inflation. This is in a nutshell what the Fed in the US is trying to make happen - create inflation so that nominal rents can catch up to nominal home prices - betting that the overvalued homes will appreciate in nominal terms less than inflation, or decreasing in real terms.

Then to address the issue of the LT RMB/USD and oil prices and what not is a much more complicated issue, because you've got inflation in china outpacing inflation in the US, and then you've got decrease labor competitiveness in chine, which impacts the current account and all sorts of variables moving around. Above my paygrade.

America has vast quantities of empty homes too. And not just due to the financial crisis. What's the difference between houses built and purchased on unworkable credit agreements and thousands of houses built for cash and left unused due to a lack of unworkable credit agreements?

The problem is bigger than just China.

yes, but the US is currently seeing the impact of all those excess homes. The people getting all breathless about these vacant homes are essentially saying the same sort of thing is going to happen in China. Also bear in mind relative household formation in the US is greater then it is in China, so the natural ability to absorb a similar propoprtion of excess homes is greater in the US then it is china. The likely huge decline in prices means people will upgrade their homes in china, but they'll still be an excess of supply - now the Chinese quite rationally might choose to bulldoze those homes. Then you end up with the Real Estate speculators getting washed out, probably some SOE's losing a bunch of money, but the general housing stock greatly improving. All very good. So then whom does this matter to? Brazil and Australia who have supplied the raw materials for all of this.

Abeizer - the problem with viewing a hard asset as an inflation hedge is that it needs to be fairly valued when you purchased it, otherwise inflation provides a way for the real yield to mean revert - see what I was saying about the FED/Inflation/US home prices. Inflation is the "easy" way to fix a housing bubble.
posted by JPD at 10:29 AM on March 30, 2011

Thanks JPD, get your point now. I'd presume the labyrinthine tangle of administrative and market factors and the special status if land would make it unlikely that values were ever fair in any ideal model sense.
posted by Abiezer at 10:43 AM on March 30, 2011

I like how the video starts out by saying "China surpassed the United States as the world's largest manufacturer". Which means that the U.S. makes almost the same amount of stuff as China, and up until recently it actually made more stuff then china.

Yet, for years and years people kept saying that the U.S didn't have a "Manufacturing base" and "We don't make things anymore" and bla bla bla. Obviously that's not the case and in fact the U.S. made more stuff then china up until last week (or whatever)

(And the idea that a country with 300 million people should manufacture more stuff then one with 1.2 billion is ridiculous)
posted by delmoi at 11:00 AM on March 30, 2011

If the beauty parlor person is making 9000 rmb a week, then the cost of a hair cut has gone up so you've got inflation. If you've got inflation in wages and then rents grow into the current home prices that's a great glidepath for the economy, but it also means that in real terms the investors in the apartments (and the general consensus seems to be that they are owned by investors)or the banks who made the loans, will have gotten absolutely crushed because the value of their asset has not gone up with inflation

Real returns for the upper middle class are hard to find in China. I think these investors will happy will just protecting their money from inflation.

Something has to give here in China. The demographics say they are at peak young adult now, which tells me wages are going to have upward pressure, and complicating matters is that the entire nation wants to live in the good cities, so demand will always greatly outstrip supply.

These "Ghost Cities" out in the sticks are not the true picture of the Chinese land boom. The fundamentals are simply investors pre-running the transition of urban China from the 3rd world decrepitude it was in the 1980s to the world-class urban life it aspires to later this century.

But I haven't been any closer to China than having spent a night in Seoul, so I'm just talking through my hat here about this. The speculative investment certainly does look like a Florida or Nevada-style bubble, but I also see differences here, where the "China As #1" school starts walking the talk of being a world power, perhaps linked with the concomitant continued decline of the US.

Nobody can say what the world will look like in 2030. Oil might very well be $1000/barrel. Gold, $10,000/oz. Chinese wages at parity with the US, just like ol' Perot was saying back in '92.
posted by mokuba at 11:38 AM on March 30, 2011

I was visiting Dongguan and someone said we should visit the mall. We went to a large, bustling street market outside the mall. I asked if we were going inside the mall, but was told that it was empty. I really had no idea of the size of it. It was pretty much just ignored by the people there.

I still don't understand why the government doesn't just move the street market inside, if the inside is empty anyway and the government controls the mall.
posted by Quonab at 11:44 AM on March 30, 2011

Eh, I'm not really sure I see what's going on there as economically horrible. It's probably going to really suck for some 'investors', but so long as the buildings are are built well they'll still be around for people to move into at reasonable prices. The only ones getting screwed are the investors.

I have a horrible bit of prejudice myself -- if more people had played SimCity 2000 15 years ago, you wouldn't get this.

The interesting thing is, the Chinese government knows this is a problem, and is trying to stop it. In fact they're doing things like not even allowing mortgages to prevent people from speculating beyond their means (which is what made the U.S. crash so problematic)

Weirder yet, this demand for empty housing investment is a driving factor in new development. Contractors build new condos with the intent of selling them to investors so they can sit empty.

So the consequence is that Chinese cities are filled with these things that look like condominiums, but are actually brick-and-mortar savings accounts that just occupy space and look pretty.

Hmmm... That's interesting. Almost like buying gold. No value except the value placed on it by other people. In that case, the bubble may not burst for a while. Which would be problematic.

As the yuan strengthens, $900 a month will become $2700/month soon enough. The Chinese will be able to buy more with their yuan, and this may spur economic development in some areas (while taking a toll on export sectors I guess).

They'll be able to buy more imports. But they won't be able to buy more stuff valued in Yuan unless there's massive price deflation. Which would mean the prices of houses would have to go down, which is what's not happening.
posted by delmoi at 11:48 AM on March 30, 2011

Real returns for the upper middle class are hard to find in China. I think these investors will happy will just protecting their money from inflation.


yes - that's the point - they won't be protected from inflation. they'll have negative real returns even in your best case scenario. And even then you would have to truly believe in chinese exceptionalism (the way americans believed in American Exceptionalism) for that to be the case. Quicker negative nominal returns have historically been ubiquitous in this sort of situation. Indeed there has never been an asset bubble that was successfully painlessly deflated.

I'm not arguing that China won't have real wage growth, it almost certainly will, but with real wage growth almost always comes some inflation.
posted by JPD at 11:57 AM on March 30, 2011

But they won't be able to buy more stuff valued in Yuan unless there's massive price deflation. Which would mean the prices of houses would have to go down, which is what's not happening.

No, land works different since it doesn't have a cost of production. When people have more money at the end of the month, it will end up in rents and land value.
posted by mokuba at 12:12 PM on March 30, 2011

And even then you would have to truly believe in chinese exceptionalism

My thesis doesn't involve "exceptionalism", just 300-500 million Chinese becoming more wealthier this century.

From what I gather, the wage level in Beijing now for very good jobs is 元7000/mo.

Somebody working 30 hrs a week at Walmart makes that much here in the US.

There will be normalization between these two wage levels over time.

We go down, they go up.
posted by mokuba at 12:34 PM on March 30, 2011

The demographics say they are at peak young adult now...mokuba

This.

I think the population growth rate tells it better, but the point is similar: it's easy for numerous actors in the Chinese real estate markets to believe prices are going to continue to go up because they've had such robust population growth for so long. This is coming to an end.

However, a major caveat to this trend is the way in which urbanization can effectively replace population growth. We tend to think of the RISK version of China, when in fact, the urbanization is more concentrated. There's a significant portion of the Chinese population that may still migrate to urban areas to help forestall this bubble. I'm not familiar with the data, and can't begin to provide guesses as to timing.

“I’ve met a lot of smart people in my life, and they’re the ones who are eventually always right and they always know where things are going [and] they always underestimate friction in the world and how long it takes to get there.” - Tom Glocer

Danger to those who expect a quick unwinding of this. Remember that the US RE bubble began in earnest in 1996 and it took over a decade to pop.

What does this mean for their ghost cities? Since normally housing depends on population AND income, one possibility is that China's economy does effectively morph into a full-spectrum first world economy and slowing of population growth (and eventually urbanization) are eased by real wage gains.

There are serious challenges to this happening, not least of which is the supply chain (re: you can't run on coal forever).

Regardless, the urban land management is appalling. China is committing the exact same urban renewal mistakes that the US did in the latter half of the 20th century. The longterm effects of lost economic connectivity and energy ecology will seriously screw them. That's why people love Mediterranean cities in Europe and Persia, but they don't know why...

“Thermodynamics allows living things to organize. They need to burn a lot of food, but then they can read books…It takes time to organize the living.” -User Illusion
posted by Reasonably Everything Happens at 12:38 PM on March 30, 2011

From what I gather, the wage level in Beijing now for very good jobs is 元7000/mo.

Somebody working 30 hrs a week at Walmart makes that much here in the US.

There will be normalization between these two wage levels over time.

We go down, they go up.

no one has ever debated that fact. Real wages will go up and they'll got up a lot for decades, because some sort of convergence will happen.

The problem is that the price of these new homes relative to median incomes is insane and real wage growth will not make them rational for decades. The math just won't work.

as in example in the US real wages from 1939-2011 grew at 1.2% per annum - and that was a great time period for americans. If you take the best 30 year time period - 39-69 - which both benefits from a biased down starting point, and the US being the only undestroyed economy post wwII - was 3%. For the last 40 years btw real wages have been flattish in the US.

Ok so lets say China has sustainable 4% real wage growth - both seems reasonable, and is better then the 3.5% the did from '00-'08 - (google it, its an economist article)

So then lets look at some other data - I've seen Beiking prices quoted at 27x median income, I think this piece says something like 15x median income for the average home. Lets use that, as Beijing should be more expensive. In most western countries with lax building restricitions the equilibrium house:income ratio is something like 3x. Lets give China an extra turn and say 4x because of the greater then in the west income growth rate (although the lack of mortgage availability would acutally normally tell you a lower number, but I'm trying to be generous here)

So our house is worth 100 in real terms, and our home buyer makes 6.67. In order for him to afford his home he needs to make 25. That would take him 34 years of real wage growth at our 4% number. At 5% real wage growth it takes 28 years. If we said 5x median income was normal (about as bad as riverside county and maricopa county got) and 5% real wage growth you are still looking at 24 years. The numbers don't work.
posted by JPD at 1:12 PM on March 30, 2011 [1 favorite]

That's why people love Mediterranean cities in Europe and Persia, but they don't know why...

It's simply about how livable and human-scale the street level is; the article's pictures are pretty horrible on that score.
posted by mokuba at 1:15 PM on March 30, 2011

So the consequence is that Chinese cities are filled with these things that look like condominiums, but are actually brick-and-mortar savings accounts that just occupy space and look pretty.
posted by qxntpqbbbqxl

That sounds a lot like Spain, circa 2005. People putting all their savings (and a lot of money that they actually didn't have) into multiple houses, and keeping them empty (in the Spanish case because it's almost impossible to expel a defaulting tenant). Everybody thinking real estate couldn't possible devaluate. And we know how well that ended...

An important aspect to consider is that, while mortgages played an important role in inflating the Spanish and Irish real estate bubbles, it wasn't the only form of credit that contributed to them. Nearly as important was the role of cheap credit provided to real estate developers. Considering how creative Chinese accounting practices are said to be, I wouldn't be surprised if Chinese real estate developers compensated the lack of mortgages by all sorts of heterodox deferred payment schemes...
posted by Skeptic at 1:22 PM on March 30, 2011

Skeptic - I saw a website today offering 0% down, flexible payment terms (read negative-amortization), euribor +.25% financing for apartments in a new development is Estepona.

From the Caja that had repossesed the complex on a defaulted construction loan.
posted by JPD at 1:25 PM on March 30, 2011

Well, JPD, right now I don't think I'd take an apartment in a new (and thus deserted) development in Estepona if they gave it for free. Which pretty much sums up the quandary the Cajas are in right now. And 0% downpayment? Jesus H. Christ, they'll never learn, will they?!
posted by Skeptic at 1:37 PM on March 30, 2011

JPD, one thing that will skew your calculations above is the size of hidden income for the wealthiest of the urban middle classes - understated by by a sum equivalent to 30% of GDP that paper reckons! I see that second link goes on to talk about how that affects affordability.
posted by Abiezer at 1:40 PM on March 30, 2011

its the median tho, not the mean, but yeah its a very imprecise calculation - but hey even if I'm off by 50% its still a long time.
posted by JPD at 1:45 PM on March 30, 2011

Yes, don't doubt you're right about how affordable these are for the average person, phrased my comment above poorly. I suppose the more salient impact of that smaller number of people with the money to spend is that the hope of capturing some of that might provide some of whatever logic prevails in the continuing building boom where otherwise the sums would be even more mad from a developer's point of view.
posted by Abiezer at 1:57 PM on March 30, 2011

I'm in Tianjin this week with work. Frankly, it's a horrid place; gray, polluted and the traffic is awful. Every time I come here I get a cough and blow black stuff out my nose.

Anyway, I was bored the other night and walked into the high end shopping mall close to the hotel. It was 5 floors of shops, all stocked with brand names and wannabe brand names, only a few of which were known to me. There was no mix of stores like you'd find in a western mall (or even the malls back home in Shenzhen) just clothing and jewelery, where's the damn chemists/Boots when you want one? From the approximately 15 people there, it appears that the ghosts are its main trade.

What struck me after I left is that there was no food court, no coffee shop, no benches to sit on and people watch. They built it and hoped they would come, but they missed the social aspect of shopping that a lot of people go to malls for.

I've mentioned before that my apartment complex here is subject to only about 50% occupancy as owners just wait for their places to appreciate before selling. I'm not sure it's going to end well as all the locals I talk to don't believe that the bubble will ever burst.
posted by arcticseal at 5:35 AM on March 31, 2011