Is China now building empty apartments at gunpoint?

Let me show you some whacky Chinese housing data from Gavekal. First, the price trend needs to correct:

So, too, does inventory, which remains hilarious and starts are making it worse:

As we know, macroprudential shut off tier one city price growth two years ago. Price growth has been all in the boondocks since:

But what is a little bizarre is this last chart which shows that the most recent surge in floor space sold (and construction) has been in tier one cities, the opposite of the price pattern:

Now, there might be many reasons for it. Demand is still there despite price falls, for instance. Maybe its shanty town reconstruction.

But, given I’ve never seen this price/sales/starts divergence happen before, I’m wondering if this is not a symptom of a more peculiar Chinese central planning phenomenon. If you have the ability to summon SOE (and private) executives to the court of the God King, and said overlord has the power to instruct you at the point of a gun to build in his glorious name to counter the Trump barbarian, then where would you choose to erect more vacant apartments?

It would be the sought after cities, right? The ones where demand and prices are likely to hold up over the long run.

I know it’s all a bit conspiratorial but just sayin’…

Comments

  1. How long can this continue? What happens once they have built an apartment for every man, women and child?

    • Then they build them each an investment property or two.

      A chart of floor space per capita would be interesting if anyone knows where to dig one up?

      • Saw a report saying they already had 30sqm per head of residential accommodation and 64 million empty apartments.

        Given they have about 52% of the population already urbanised and will flatten out at 65% around 2035, then doing some simple maths on 1.3B people says 169M to still urbanise. Assume 3 per apartment and there’s your existing stock hoovered up (not all in the right locations it’s true).

        However, given the appalling build quality of Chinese apartment blocks plus putting new builds in the right cities, then one can imagine they could need to build forever and recycle the steel for ever. Oops, there goes our iron ore trade

      • @mdsee
        I read a year or no ago that most of those people wheel have not yet urbanised can’t afford to move into the cities, well buy a place at any rate. So things might be weaker than your figures suggest.

      • It sounds like a joke, but its not. People who already own a home are buying apartments, unseen, in ghost towns, solely as investments. If ever the price of the empty apartments goes down they riot, and the government intervenes to ensure the price can never go down.

        Its actually not entirely dissimilar to here, when you think about it.

    • Rebuild all the badly built ones?

      A few decades work right there.

      Or rebuild a few recently built football stadiums that are barely used!

      Like advanced countries do.

    • Since it is harder to buy investment units in Sydney and Melbourne due to Xi’s wise capital controls, investments are now made inside the glorious peoples’ republic.

    • Chris

      They’ll just start knocking the older ones down and rebuilding.

      The average high rise unit development even in tier one cities like Shanghai that is less than a couple of years old looks like it has been in use for a couple of decades. From memory in theory the lifespan for these buildings is only about 20 years but in practice many of them will struggle to last that long.

      https://www.youtube.com/watch?v=XopSDJq6w8E

      (though to be balanced I don’t think either of these presenters are construction guys).

      edit: sorry, gramus already posted this link.

  2. “Now, there might be many reasons for it. Demand is still there despite price falls, for instance” Seems entirely intuitive to me.

  3. ResearchtimeMEMBER

    By one estimate – there should be enough housing in China, with existing inventory, planned and housing under construction, for 2.6bn people by 2028!

    Oh wait… the current population is 1.4bn and falling… oh, and the small matter, of current Chinese debt now exceeding US$42tn, and accelerating

    • Plus they’ve detonated a manully operated neutron bomb in Xinjiang. They’ve moved a million or so of the local ethnics into re-education centres leaving han settlers with existing properties to move into. (it is not unheard of in China for people to remain detained in such centres for many years).

      • The Muslim Urghur in the West are both re-educated & also pushed into more controlled enclaves.

        Chinese has 2 major insurgencies & 3 rebellions plus a massive 5 year plan target in moving around or exporting their people problem.
        That’s why these Chinese tier 2 cities are overbuilt & vacant, because tens of million Chinese intended to be forced into them are resisting that, or are instead being exited from China in their slum clearance programs.

        The current Chinese 5 year plan is that 100 million Chinese peasant ‘internal migrant illegals’ (China internal laws system Hukou) clustered around the tier 1 cities in the east & south east will be relocated.

        Slum clearance.
        Peasant low life, 1 or 2 generations now as illegals around the tier 1 cities.

        So far China has found it easier to export them rather than move them internally, creating the oversupply mentioned in the article.

        Low life, uneducated, misfits, petty criminals, old, sick, useless.
        The Chinese government & their criminal syndicates collaborate to package them up as ‘students’ foreign workers visitor etc.

        $2k in China buys you entry to Australia as a TR then
        PR. Australia a naive wide open target with very easily exploited borders and a broken visa system.

        Fake doc, fake visa pretext, fake health check, fake funds, agent debt loan, government rubber stamp and then the Chinese factory worker or stall owner or working girl or young petty criminal is here in a couple of weeks : in Burwood living & (working illegally) in their chinese enclave.

        Sent to South Asia, Middle East, Africa, Pacific, Australia, New Zealand, UK, Europe, Canada, US or wherever they can be dumped, be a burden on that countries economy, repay the agent procurer loan debt & send back the remittances.

        So mass China slum / social bottom layer cleansing, as well as China Inc imperialism / colonisation, and economic benefit – shift their burden, influence & control onto rest of the world.

        We have 1.3 million Chinese onshore.
        596k as PR, almost all misfit low life useless unskilled mainland communist Chinese – direct from China or via transit country shopping along the way until they got in.
        Where does their big money come from?
        The Chinese government party officials & criminal syndicates using them as mules and onshore procure to launder and wash the Chinese dirty money, hundreds of billions via this ‘export’
        Why a Chinese factory worker or ex peasant with no real skills and no apparent source of wealth & income will then buy up established Australian housing (to rent out cash sublet to the other Chinese) and so on.
        Just money mules, laundering it for the criminals into an Australian safe haven / no controls, few checks and no repatriation treaty.

        430k as TR, misfits, criminals, socially undesirables as fake students & ‘partners’ , skilled, family reunion, spousal and all the other rackets. Also highly active in washing the billions of dirty Chinese money in & now out as its the epi-centre of their vice & crime colony onshore.

        120k of the 230k non NZ born SCV (one third of all NZ SCV here came in via NZ / Asian/Indian back door)
        Even lower quality, this is the bottom layer that couldn’t even get into Australian on a PR or TR.

        At least 300k plus Chinese as ‘visitors/tourists onshore at any one time long stay multiple stay, most only here to wah the money as mules, and/or working illegally.

        So that’s 1.4 million Chinese slum clearance & socially undesirables – dumped into Australia now onshore in some residency or visa pretext.
        Here is a link on the scale of the Chinese slum clearance program.
        https://foreignpolicy.com/2018/02/01/chinas-middle-class-is-pulling-up-the-ladder-behind-itself/

    • By the end of 2012 they had already built enough units to house every family in China. They are currently engaged in ‘Keynesian ditch-digging’ — carry on building and ‘grow’ the economy.