China’s glut of idle property causes headache for the government
China’s glut of idle property causes headache for the government
The industry that has traditionally powered about a quarter of GDP has been in a downward spiral that policymakers have struggled to halt
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.
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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?
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?
Have you considered writing comments while not in a state of apoplectic rage? That way you might actually make a reasonable point instead of whatever this word-vomit is.
Aww, guess you ran out of counterarguments. That's ok.
Real estate should not be an investment and the people that got burned knew what they were signing up for.
I'm not sure how to answer this. We're talking about empty places. You think these people were buying and building these places to lose money? As you point out, it's been a great investment until now. Now the bubble the government created is bursting, which is the problem the article is talking about.
The people who invested knew that they were buying investment properties. The developers sold based on urbanization projections that did not follow through, the investors bought it up, and now the developers lose money and the investors who could afford to buy multiple homes lose money.
How terrible.
(As an aside, I think China's reported urbanization rate is below reality because a lot of places that would be considered urban in Europe or North America are listed as rural in China). Under China's definition, living a 15 minute drive from the center of a 200k-population city could be a "rural home." I think that China's urbanization numbers sent a false signal to developers that more development was needed, when in fact China was much further along the urbanization curve than the numbers indicated.
I don't care that they are losing money, but the point is that it represents a threat to the stability of the government.
Developers losing money and consolidating property assets in the government? What, exactly, does this threaten?
GDP growth? It's been a 1.5% headwind, and China is still blowing through GDP projections.
Climate change? The collapse of the construction industry has been a huge net positive for emissions reductions.
Housing prices? Those have been going down.
Savings? Only insomuch as if you intended to own multiple homes (that is, you're the landlord class). Otherwise, you still own a single home that you need to live in.
Maybe you should ask the Chinese government why it's a big deal, because they are the ones who have been propping it up and are attempting to do so again now. It's all right in the article.
The Guardian doesn't speak Chinese (or rather, they don't understand it). Their reporting on China is consistently incompetent for that single fact. They refuse to dig through Chinese reports and Chinese data because they can't understand it. The data is right there, plainly published for the world to see.
If they did, they would know that real estate's contribution to GDP has fell off a cliff ever since Xi Jinping declared "housing is for living, not for speculation." If they did, they would know that investment into real estate has pretty much entirely collapsed and shifted into manufacturing (clean energy, EVs, nuclear, robotics, etc.) If they did, they would know that their stories about "ghost cities" a few years back... Ended up being, well, cities. If they did, they would know that the prevailing thought on Chinese social media is that the government is allowing real estate developers to fall... And they're definitely falling.
That's what the data tells us. The bubble is actively deflating as we speak, and many estimate it to have been in excess of a 1% headwind on GDP growth in 2023... Citi just revised their projections of full-year GDP growth to 5%, and so have Goldman Sachs and BNP Paribas.
You didn't demonstrate that they are wrong, you just said they are wrong. You didn't even contradict the claims made in the article: that the government is clearly making efforts in an attempt to prop this up.
If they did, they would know that the prevailing thought on Chinese social media is that the government is allowing real estate developers to fall… And they’re definitely falling.
Well let's start with, the prevailing opinion on social media here is that the Chinese government is attempting to prop up the real estate market, but it's still "deflating." Huh, interesting how "prevailing thought" on social media doesn't really mean all that much.
And they are pointing to actions that contradict this "prevailing thought," actions you haven't actually challenged. And those actions that they point to shows that it's falling despite their efforts, not that they are allowing it to happen. Again, you seem to just be ignoring facts you don't like.
We can believe whatever reality we want when we don't have to consider the facts. Just like good Trump supporters.
Shenyang in north-east China is offering 100 yuan (£11) a sqmetre subsidies for some homebuyers. Kaifeng in central Henan province is offering an income tax refund to anyone who buys a new property within a year of selling their old one. Changhsa, the capital of Hunan province, is encouraging developers to offer no-questions-asked refunds of housing deposits if a buyer changes their mind within seven days.
Local stimulus, which differs from Central government policy because contrary to popular belief the Chinese government is not a monolith. Different provinces want to get investment at the cost of other provinces, but this does not change the fact that in aggregate China's bubble is actively being deflated by the actions of the central government. The prevailing trajectory of the market, and the actions which the central government have taken in this regard, are very clear. In modern terms, this is "picking up pennies in front of a freight train."
Last month, the state-owned People’s Bank of China (PBOC) unveiled a 300bn yuan relending fund to support local governments and state-owned enterprises to buy up unsold stock and turn it into affordable housing. The central bank also lowered the minimum downpayment required for prospective buyers.
sigh do you know what the minimum down payment for a home in central Beijing is? 50%.
Give me an action that indicates the central government is not trying to institute a controlled collapse ("soft landing") of the real estate market. The numbers don't lie, but apparently you do.
you say "property should not be an investment".
that's lovely. that's fine.
He didn't disagree with you, so stop acting like he did.
He said that it's one of the few / the easiest way for them to "invest" their money. Not save.
If your entire argument is that the Chinese stock market is as easy to access and use as the housing market, I'd want you to be very sure, and clear. Including bonds.
Ultimately, it looks like you just want to fight, but no-one is fighting you.
Small dog syndrome.
I, too, like evaluating investments based on "how easy is it for me to make" rather than "what is the risk/return."
you do? I'm very happy for you then. no-one else is evaluating anything here, so I'm glad you've found something to occupy yourself with.
Is this a common thing in the US? Evaluating investments based on how easy they are to make, independent of their PnL?
I wouldn't know. you're the only person evaluating investments that I know of.
You claimed that real estate is one of the easiest ways for people to invest their money.
nope, I haven't claimed anything.
you might be thinking of someone else. You can tell when you're communicating with different people on the internet by the name that is above the text they've written.
in any case, you should reread my comment a few back which addresses the subject of "easier".