2011 January 02 Sunday
Empty Chinese Cities
China in a massive real estate bubble? Mish Shedlock points to a Daily Mail piece on empty Chinese cities as seen from satellite pictures and ground-based pictures. I did not realize just how many such cities stood empty.
The Daily Mail is particularly obnoxious down-market trashy British tabloid.
Anyway, in London alone there are no fewer than 800,000 families on the 'waiting list' for social housing.#London has a population of around 7 million persons#.In the UK as a whole, 5 million families are waiting for the chance of subsidized housing.They might wait for years and years and years for a coveted 'council house' #decades is normal#.
If Britain could build like the Chinese, they wouldn't be sneering.
Yes, but there's a lot of relocation in China. I seriously doubt it is a "real estate bubble"
We'll see China growing at close to 20% by the end of 2011
This isn't about relocation, this is about misallocation. No one lived there and got relocated; no one is going to be moving to these cities either as there is (generally) no reason to move there.
My main curiosity is about the structure of the finances that paid for these white elephants. In the USA, I would expect that a massive loan was taken out by a homebuilder, backed by the finished project as security; and that once the thing tanked (found no buyers / people to move in), the bank that made the loan would have to eventually take a massive loss. But actually taking the loss, on paper, could be delayed for a long time - the bank could hold the real estate and claim it was still worth whatever inflated figure the initial plan called for.
Anyway, I have no idea how that end of things is structured in China. Are there unrealized losses? Is there an incentive to leave them unrealized? Would realizing the losses threaten the stability of their banking system (leave the banks below capital requirements), or are the loanholders not even banks at all?
The one thing I am quite sure of is that the value of these empty cities are part of China's GDP figures, and on that front some sort of writedown has to take place. But no one believes the official Chinese GDP figures anyway, so that hardly matters.
I know some of you chaps will be eager to move out there for their first property. Don't. China, unsurprisingly, is worst than Bradford...Or a no go zone. Just spent 4 months out there, for what it is, the poverty is unbelievable....