1y ago

China’s glut of idle property causes headache for the government

www.theguardian.com

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.

World News Non-US @lemy.lol

TVgog56789 @lemy.lol

1y ago

China’s glut of idle property causes headache for the government

www.theguardian.com /business/article/2024/jun/12/chinas-glut-of-idle-property-causes-headache-for-the-government

76 comments

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.
  
  Does china house them or does china do something else with them?
- 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?
- I live in China. Trust me, you don't want to have those homes in the US. The house I live in has been completed in 2016 and I'm the first tenant, moved in in 2018, and it's got more issues than my dad's house from 1965. Houses here are built as cheaply as possible, skimping on building materials, safety, plumbing, insulation, wiring, etc.
  The pricing bubble is just a joke on top. The actual value of the real estate here should be about 20-25% of what it is in reality - for example if I were to buy the house I'm renting right now, I'd break even after 114 years. Not taking any repairs or interest into account.
  
  Sadly, that’s not much different than the US
  
  You wouldn't want US homes in Europe, either. Most of the world has astonishingly shit construction in the name of higher profits and the understanding that housing has very limited lifespans.
  Some US homes are great - robustly built, well-insulated, quiet, no leaky sewage, no leaky building membrane, wires routed properly, etc. Unfortunately, a lot of them were built decades ago. If you're evaluating them in terms of materials or construction quality, US housing quality has gone straight off a cliff. Sure, there's a bunch of glass facades on new buildings, but they hide the fact that sound insulation between units is nonexistent, the heat insulation is barely slapped together, the outlets aren't all plugged in, and the hot water either turns completely on or completely off. Tour a new California townhouse and tell me again that it's not built as cheaply as possible. Developers have figured out how to be stingy on everything you can't see and instead dump money on fancy appliances and a marble countertop... Even if the toilet clogs if you look at it funny and you can hear your neighbour three doors down humming to himself.
  Meanwhile, most US new build apartments are 5 over 1s, which are notorious for being a tinderbox. Though, US fire code is really well done, so if there's a fire odds are you can make your way out in time.
- 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
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.
- https://en.wikipedia.org/wiki/Extraordinary_Popular_Delusions_and_the_Madness_of_Crowds
In a communist state, why are unsold homes an issue? Why not just re home the millions living in bad conditions?
- it's because China is a capitalist country with a capitalist economy.
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?

76 comments