China still building empty apartments

Yesterday, Zarathustra’s posted another interesting China report, which contained the below chart showing the continued strong growth (25% YoY) of fixed asset investment:

Below find a PBS Newshour video report (h/t Hugh Pavletich) from Beijing-based economist, Yoram Bauman, who explores the possibility of a Beijing housing bubble.

In the video, Bauman takes viewers on a brief tour of empty new apartment buildings sitting along side construction sites where yet more apartments are under construction.

Yet, despite the glut of empty apartments, Bauman uncovers anecdotal evidence of Beijing apartments with price-to-rent ratios of around 55:1 (gross rental yield of only 1.8%) – nearly twice that of New York, which is the United States’ city with the highest price-to-rent ratio.

The video provides an insight into a situation that seems unlikely to end well.

[email protected]

www.twitter.com/Leithvo

Unconventional Economist

Leith van Onselen is Chief Economist at the MB Fund and MB Super. Leith has previously worked at the Australian Treasury, Victorian Treasury and Goldman Sachs.

Latest posts by Unconventional Economist (see all)

Comments

  1. That is not what I call a deep and informative analysis. Shower scene was mildly amusing though and the young woman seemed cheerful enough (have just increased number of views…!).

    • That is not what I call a deep and informative analysis.
      .
      That is not analysis.. that is on-the-ground evidence.
      .
      I guess more and more economists are frustrated by the refusal of the China boosters to accept the reality when it is presented as hard emperical data/stats. Now, they have resorted to taking their handycam along and recording the damn reality for ya, hoping you will at least accept that.
      .
      So, don’t complain and just be thankful 🙂

    • That is not what I call a deep and informative analysis.

      if ($comment == negative_china_anecdote) then call discredit();

      • but Lorax, the reverse of that is ($comment == negative_china_anecdote) then call it indisputable fact();

        I have been hearing you and others argue that China is on the verge of toppling for years, but topple they haven’t.

        Just consider for a moment that a population of 1.3 billion is so huge that what seems like an incomprehensible number of unoccupied new dwellings, is just a modest supply in a country with that population.

  2. “China still building empty apartments”

    It is much easier than building full apartments.

    • 🙂 I like your sense of humour

      Well, a lots of “empty” buildings under construction alongside of recently opened Beijing-Shanghai high speed rail line.

      It was Friday lunchtime/afternoon and no major national holiday and I couldn’t see much activity. But to be fair it was at speed 300km/h

      http://www.youtube.com/watch?v=PVKUvE2ny40

      PS: Must be watched with sound on

      • What a journey! Thanks for that Alien – and yes the patriotic song was emotional…

        On a more serious note, I hope all those that don’t see China in a more positive light watch something like this and rather than surreptitiously wish for failure see that this is real, real people with aspirations and desires not unlike our own.

        But different: The Last Train Home

        http://www.youtube.com/watch?v=6KjO50bxN54

  3. My father has been working as an English teacher in the city of Nanchang since early 2009. One of the things he noticed as strange was when walking at night the amount of apartment blocks with no lights on. He was told that they were likely bought as ‘investment’ properties by rich people in Beijing and other large cities.

    He asked does it matter that no one is living in them, he was told that the value of the properties had already risen substantially and that there is the belief that eventually people will move into them as the population gets richer.

    That can’t be healthy, seems absurd.

  4. The greater Nanchang area is a city of 5 million – bigger than Sydney and I hadn’t even heard of it until he found that teaching job there :p

  5. Hugh PavletichMEMBER

    It is a pity Mr Bauman within this rather interesting video, didn’t inform us of the household incomes underpinning these apartments in Beijing.

    I do hope there are readers here on MB, with information on Beijing household incomes.

    • Had a quick search link.

      First half of 2011, income before tax: RMB18326 pp, disposable income: RMB16236 pp.

      Looks like a credible source btw.

      • Hugh PavletichMEMBER

        Hewell – many thanks – but its all very hazy abd unsatisfactory, the household income information coming out of China.

        And so critically important too, in endeavouring to assess the intensity of the housing bubbles there.

        The Demographia Survey this year found Hong Kong to be 11.4 Median Multiple. Shanghai and Beijing are likely significantly higher than that.

        • Yet you don’t find Demographia hazy and fuzzy and accept it without question – results driven analysis perhaps?