The Secret Behind China’s Ghost Cities
Curiously, vacant, crumbling, uninhabited buildings are worth more than if someone tried to make them livable.
Rent would not come close to paying the mortgage and you would have unhappy tenants anyway.
Why China’s New Cities Are Still Empty
China’s Lehman moment
The above video also discusses the collapse, Evergrande, a huge Chinese developer.
The Evergrande collapse was conveniently interrupted by a Covid panic.
Here are some pertinent tweets from 2021.
Pettis on the Lehman Moment
- The former head of the CSRC says that, compared to other countries, too much of China’s household wealth is tied up in real estate, and too little in financial assets. With property accounting for 70-80% of Chinese household wealth, he’s right.
- But of course with real estate 3-4 times as expensive in China (relative to income) as it is in other major economies, it would be pretty hard for it to be otherwise. Only a sharp and sustained fall in property prices relative to income, or a stock market bubble, can resolve that imbalance.
- Japan in the late 1980s had even higher real estate prices and a truly epic stock market bubble, and I think real estate accounted for roughly 65-70% of Japanese savings.
Lehman moment tweet thread
Petti’s Lehman moment tweet thread
Ordos Ghost City and the ‘Inevitable’ Collapse of China
Scroll to Continue
Here’s one more video. It presents the bull case.
All three videos are worth a play. The first two are from 2021, the above from a couple months ago.
Perhaps there are one or two success stories out of 50.
China’s Bogus GDP
There are close to 50 ghost cities that could house up to 65 million people.
Construction of one city started in 2004 and was finished in 2015. It’s still empty.
Guess what happens to buildings not maintained for decades?
The buildings are worthless. Actually they have negative values. The structures are not safe and need to be torn down.
Much of Chinese GDP is a mirage of worthless dreams. Yet construction still continues.
This post originated at MishTalk.Com.
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