China's Ghost Cities Next Real Estate Bubble

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Nervous Nelly's picture
Nervous Nelly
Status: Silver Member (Offline)
Joined: Nov 23 2011
Posts: 209
China's Ghost Cities Next Real Estate Bubble

A 12 minute video from 60 minutes on the Chinese Real Estate Bubble:

Unbeleivable !! Insane ! If we thought the 2008 bubble was huge take a look at this. 

Fortunes are going to get lost.  What's your take one this people?

Sonya

 

 

pjvalvo's picture
pjvalvo
Status: Member (Offline)
Joined: Mar 1 2009
Posts: 8
Not only mainland China

Living in Taiwan for the past 4 years, I can confirm this bubble is not limited to mainland China. The speculative bubble includes Hong Kong, Taiwan and probably farther. 

Recent economic reforms and cross-strait policies have allowed for significant mainland cash to flood in to the Taiwan real-estate market. Prices have doubled and even tripled in the past 2-3 years. The word on the street is, buy real estate and get rich. None consider that the price may go down. When I mention the US and EU bubbles, people look at me like I am uninformed or just pessimistic. This was exactly the attitude in the US pre-2008.

Hong Kong and Taiwan real estate deals have both posted record highs in per-square-foot prices. This is especially noteworthy as average income has remained flat for the past 10 years. How will the population afford these new prices? 

I have visited areas(Banqiao, north of Danshui and others) where huge high-rise developments are built and sold with no occupancy. Ghost city is the perfect term. There is no local economy, no jobs, no convenience stores. These areas are clearly a result of a bubble.

As a renter, I have had real estate agents and landlords fighting over me and even lowering rents in competition.

This is very concerning because of the climate in Taiwan. If not vigilantly maintained, mold, water damage, pests and other problems will quickly destroy these overpriced investments. Even with regular cleaning in an occupied unit, this can still be a problem. 

Can anyone comment about Japan, Korea or SE Asia?

Poet's picture
Poet
Status: Diamond Member (Offline)
Joined: Jan 21 2009
Posts: 1891
Taiwan: Bubble Territory

Hi.

I did some research on-line and I agree that is a bubble going on. Usually when real estate prices, rent prices are also rising. But if they're fighting over you and lowering rent to get you, it's definitely a bubble.

Another set of factors to consider, however, is that some 87 million households own their own homes. And also, of course, a lot of households are multi-generational - even in 2- or 3-bedroom apartments/flats. New household formation has been drastically reduced. There has been a continuing drop in the fertility rate per woman: Now 1.1, it was just below 1.8 back in 2000.

Taiwan’s Housing Market Slowing Sharply (September 18, 2012)
http://www.globalpropertyguide.com/Asia/Taiwan/Price-History

Owning A Home Unattainable For Many Taiwanese (December 20, 2012)
http://www.bbc.co.uk/news/business-20779609

Speculators Fuel Taiwan's Property Price Rise (December 19, 2012) (video related to above link)
http://www.bbc.co.uk/news/business-20778406

Poet

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