China: High GDP, 64 million empty apartments. • Hacker News Board

Re: China: High GDP, 64 million empty apartments.

#41

Post by signa11 » Sun, Jul 10, 2011, 3:48 AM UTC

gopi wrote: post #5

>> There are no property taxes in most of China, so people with money park it in real estate. Exactly the case in India. Most people there park money in real estate. Also in the suburbs the official land value (determined by govt) is far less than the real market value. So investing in that kind of land is way to park black money (or corruption money). The usual real estate factors like rent-to-own don't apply, Infac…

>> There are no property taxes in most of China, so people with money park it in real estate. >Exactly the case in India. Most people there park money in real estate.

not true. there most definitely are property taxes in india. the reason why folks park money in real-estate is that it seems to an appreciating asset not being subjected to harsh vagaries of the volatile stock market...

Re: China: High GDP, 64 million empty apartments.

#42

Post by tokenadult » Sun, Jul 10, 2011, 3:55 AM UTC

prostoalex wrote: post #38

64 million empty apartments in a country with population of 1.3 billion is sub-5%, hardly reason for panic, and typical of any rental market in the US.

64000000/1300000000 = 4.9 percent is only a correct estimate of the vacancy rate if you assume that each apartment is to be occupied by only one person, which is surely an untrue assumption about China and any other country I have ever lived in. And see elsewhere in this thread

http://news.ycombinator.com/item?id=2746312

a more nuanced comment posted hours earlier.

Re: China: High GDP, 64 million empty apartments.

#43

Post by w1ntermute » Sun, Jul 10, 2011, 3:57 AM UTC

ams6110 wrote: post #35

w1ntermute wrote: post #32

Earlier quoted context omitted.

What kind of work do you do? I'm in college (CS major) now and am planning to start freelancing on the internet soon and continue that as my permanent job after I graduate. If I relocate abroad to a developing country but pretend to be located in America (just use my parents' address or something), I could make a killing off of this sort of thing and have a relatively high standard of living in a country like Cambodi…

Starting off your professional life by being deceptive is not something I'd recommend.

I'm a native-born American, with a degree from an American college. I don't see why my pay should be reduced because of my location when I'm doing the exact same work.

Re: China: High GDP, 64 million empty apartments.

#44

Post by w1ntermute » Sun, Jul 10, 2011, 3:59 AM UTC

w1ntermute wrote: post #32

math wrote: post #14

Earlier quoted context omitted.

Try Phonm Penh (Cambodia). You can buy an apartment for $30k in a premium location. If you can't afford to buy, you can rent something decent for $60 a week or less. Food is about a third to half the price of what you're used to paying. Western standard places that are great to work in are springing up quickly now. Very friendly place. A lot of people speak English. Many of them have an entrepreneurial mindset (and r…

What kind of work do you do? I'm in college (CS major) now and am planning to start freelancing on the internet soon and continue that as my permanent job after I graduate. If I relocate abroad to a developing country but pretend to be located in America (just use my parents' address or something), I could make a killing off of this sort of thing and have a relatively high standard of living in a country like Cambodi…

Some more questions:

Is it difficult to wire money from America to developing countries like Cambodia?

For those cases where the people don't speak English, is it particularly difficult to learn the language when you're actually immersed in it on a daily basis?

What is the local social scene like? Is there a large expat community? If not, are the natives welcoming?

Hopefully it'd be possible to get some action. I don't mean to be crude, but that's sort of a requirement for me (and a lot of guys) to live in any place. It's obviously not an issue anywhere in America, but it certainly can be abroad. I have quite a few high school friends in the military, and those stationed in Japan and Korea have no problem getting local women, but Afghanistan and Iraq are a completely different story.

Re: China: High GDP, 64 million empty apartments.

#45

Post by yummyfajitas » Sun, Jul 10, 2011, 4:06 AM UTC

nkassis wrote: post #18

Would it not work if they did what Henry Ford was doing. Price them so the workers can buy them? That way the money stays in your pockets while the workers enjoy a better life? Win-Win.

Would it not work if they did what Henry Ford was doing. Price them so the workers can buy them? That way the money stays in your pockets while the workers enjoy a better life? Win-Win.

This is mathematically impossible.

Suppose your workers purchase everything they own from a company store with an X% profit margin. If you pay your employees $Y, the actual cost to you is $Y(1-X). Increasing employee pay (holding all else constant) always increases your costs.

Re: China: High GDP, 64 million empty apartments.

#46

Post by stretchwithme » Sun, Jul 10, 2011, 5:30 AM UTC

wisty wrote: post #34

stretchwithme wrote: post #30

Earlier quoted context omitted.

Yep, its the artificial markets. People have no way of investing outside of Earth either, but that doesn't mean investment bubbles have to happen. Instead of building things people don't need, in a natural market, things are made that people are willing to pay for with their own money. The building boom in China has been directed by government. Banks were told to loan. The government also created the housing boom in…

I dunno. The government incentives aren't that big, and people do stupid stuff with and without government help. There's no doubt that the government (and neo-liberal mainstream economists) failed to prevent the bubbles. But there's other factors at play. Housing takes a long time to reach an equilibrium. It can take decades for people to move out of a house that's too big for them. The market just doesn't respond qu…

Government incentives aren't that big? In the US or in China?

You think empty cities crop up all on their own? With no rents being collected, you think people will just keep building and tying up their capital for no reason?

If you mean the US, the incentives are not trivial. Interest rates are a big one and they are kept artificially low. You can write off your interest. You don't have to pay capital gains taxes on the first $250k of profit on a house.

There are first time buyer programs too. And standards for lenders were greatly relaxed around 2000, with borrowers no longer required to put 20% down.

Fannie and Freddie also helped by accepting the risks of loaning to buyers with less than adequate credit. Lenders had no incentive to even check the claimed income of buyers.

So, not sure how all these things aren't that big. I guess housing prices just double on their own for no reason.

Re: China: High GDP, 64 million empty apartments.

#47

Post by trevelyan » Sun, Jul 10, 2011, 7:22 AM UTC

jhancock wrote: post #37

j2d2j2d2 wrote: post #33

Earlier quoted context omitted.

Everything you've said assumes these cities are going to explode with 1) enough people to buy the apartments and 2) enough people who can afford them. Could you clarify your view on those two issues?

Why does the price on failed buildings have to stay high? Why couldn't the government (through a bank, likely) reclaim a bankrupt project, restructure its books and basically "give away" the units? China certainly has its share of problems. Having lots of extra housing for people to eventually move into is far from the top 10. Something related that is a bigger deal is the energy of heating and cooling housing built…

Hey Jon,

What is Shanghai like these days? In Beijing there is a ton of vacant commercial real estate, but most of it seems to be owned by organizations with no need to lease (else why not lower prices?). Where developments like SOHO are competing is by selling rather than leasing smaller condo-style units. And while the market for apartments has slowed down, there are still people buying. Fifth ring road near Echo's place is 30,000 RMB per square meter.

I wonder more what the actual cost structure is for the complexes cited in these videos. They should be the lowest of all since they're being built on satellite territories. That said, even in a worst case scenario of total default, I wouldn't expect banks to seize the property of people they've been pressured to lend money to. And I wouldn't expect the property to remain "unowned" if it seemed like that would happen. The developers would just sell the assets to a property management company and go nominally bankrupt.

Agree about the differences between China, US and EU too, but my guess is that banks are safe, and that as individual markets get overdeveloped local governments will start adopting property taxes to raise revenue. This is NOT going to be popular with people who've already taken out a 30-year mortgage to buy a 60 square meter apartment, but that coupled with price stagnation should curtail people's tendencies to treat real estate as assets for investment instead of places to live, and push prices to whatever is logical given demographic and migration trends. Soft landing?

Re: China: High GDP, 64 million empty apartments.

#48

Post by yaix » Sun, Jul 10, 2011, 8:43 AM UTC

j2d2j2d2 wrote: post #33

yaix wrote: post #15

Earlier quoted context omitted.

This is mostly what happens. Additionally, these new apartment complexes are often build in "new areas" of the bigger cities, to grow the city. China is trying hard to reach a level of urbanization comparable to the west, so they need to "grow their cities" somewhat aggressively. I have lived in two of those newly build complexes myself. First there is not much around, roads, maybe a supermarket and a few stores. The…

Everything you've said assumes these cities are going to explode with 1) enough people to buy the apartments and 2) enough people who can afford them. Could you clarify your view on those two issues?

Here in the city I am in, there is no problem at all selling those houses, and in other bigger cities it is similar. More and more people move to the cities if they can afford it. Better schools, better hospitals, and you Hukou (you "citizen registration card") it will not say "rural resident" anymore; to be a "city resident" is looks much better.

Buyers can be reasonably sure that those new areas will be developed a few years later.

However, for some 3 years now, the state and central gov't constantly come up with new laws to avoid that people buy many apartments and leave them empty. The new property tax in selected cities is one example. An increase in required down payment capital is another (http://usa.chinadaily.com.cn/china/2011-07/07/content_128581...). In the city I am in, you only get a bank credit for your first apartment now, to buy further apartments, you have to finance them yourself.

Buying an apartment is the safest form of investment in a country where the health system is only just being built up, and the retirement system is not widely trusted (yet). It is more the thing of the new middle class. The really rich people will try to get part of their money out of the country as soon as they can. You never know how stable the country will be tomorrow, is usually the reasoning.

Re: China: High GDP, 64 million empty apartments.

#49

Post by yaix » Sun, Jul 10, 2011, 8:48 AM UTC

zoowar wrote: post #12

Ghost cities also keep construction workers employed.

Why is this downvoted? It is a valid point. Especially in 2008/09 they were rebuilding every second road in the Chinese city I life in, even though the roads where perfectly fine and had just been finished a few years earlier. Same for apartment buildings. They can not just stop building them, because there are literally tens of millions of people getting their income from constructing those buildings.

Re: China: High GDP, 64 million empty apartments.

#50

Post by robryan » Sun, Jul 10, 2011, 9:38 AM UTC

iwwr wrote: post #25

fleitz wrote: post #23

Earlier quoted context omitted.

The losses aren't hidden, it's what one would call a long term investment. Because the Chinese government isn't beholden to a two year election cycle they're able to think over a much longer term horizon. Whether this is good/bad in the long term remains to be seen, as a more dynamic business environment might threaten their long term vision. 64 million surplus homes in China could be filled in a heartbeat. China is…

For every year they sit empty, they depreciate physically and they also need regular maintenance. Those are actual resources being used. And if the buildings are in the wrong location altogether, it may be cheaper to just tear them down than try to find a market for them.

Regular maintenance may be a lot lower ongoing cost in China than America, maybe because of that it makes more sense to build ahead of demand.