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In China, A City With Lots Of Buildings, But Few People

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http://www.nytimes.com/2010/10/20/business/global/20ghost.html?_r=1&ref=business

By many measures, this resource-rich city in northern China is a fabulous success.

It has huge reserves of coal and natural gas, a fast-growing economy and a property market so sizzling hot that virtually every house put up for sale here is immediately snapped up.

There is just one thing largely missing in the city’s extravagant new central district: people.

Ordos proper has 1.5 million residents. But the tomorrowland version of Ordos — built from scratch on a huge plot of empty land 15 miles south of the old city — is all but deserted.

Broad boulevards are unimpeded by traffic in the new district, called Kangbashi New Area. Office buildings stand vacant. Pedestrians are in short supply. And weeds are beginning to sprout up in luxury villa developments that are devoid of residents.

“It’s pretty lonely here,” says a woman named Li Li, the marketing manager of an elegant restaurant in Kangbashi’s mostly vacant Lido Hotel. “Most of the people who come to our restaurant are government officials and their guests. There aren’t any common residents around here.”

City leaders, cheered on by aggressive developers, had hoped to turn Ordos into a Chinese version of Dubai — transforming vast plots of the arid, Mongolian steppe into a thriving metropolis. They even invested over $1 billion in their visionary project.

But four years after the city government was transplanted to Kangbashi, and with tens of thousands of houses and dozens of office buildings now completed, the 12-square-mile area has been derided in the state-run newspaper China Daily as a “ghost town” monument to excess and misplaced optimism.

As China’s roaring economy fuels a wild construction boom around the country, critics cite places like Kangbashi as proof of a speculative real estate bubble they warn will eventually pop — sending shock waves through the banking system of a country that for the last two years has been the prime engine of global growth.

Just Tuesday, China surprised analysts by raising its benchmark one-year lending rate for the first time in nearly three years, apparently to dampen speculation in the property market. But analysts doubt the small increase in lending rates will slow the incredible building bonanza that is reaching even remote regions, like this one.

Kangbashi was projected to have 300,000 residents by now. And the government claims that 28,000 people live in the new area. But during a recent visit, a reporter driving around for hours with two real estate brokers saw only a handful of residents in the housing developments.

Analysts estimate there could be as many as a dozen other Chinese cities just like Ordos, with sprawling ghost town annexes. In the southern city of Kunming, for example, a nearly 40-square-mile area called Chenggong has raised alarms because of similarly deserted roads, high-rises and government offices. And in Tianjin, in the northeast, the city spent lavishly on a huge district festooned with golf courses, hot springs and thousands of villas that are still empty five years after completion.

Could they just demolish the old City and move everyone into shiny new apartments?

At least China isn't suffering from huge malinvestments.

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http://www.nytimes.com/2010/10/20/business/global/20ghostbar.html?ref=business

As the real estate action in Kangbashi New Area reached a fevered pitch last year, banks that are controlled by the national government, concerned about overbuilding, began restricting loans to property developers here.

Many builders barely broke stride. They turned to underground banks that are part of China’s thriving gray market.

Real estate brokers say buyers here, too, often sidestep official bank loans, financing their home purchases from hidden sources of income, whether graft, undeclared bonuses from government jobs or money earned legally but not reported to tax authorities.

Such money, which does not show up in government data on personal income, is common in China and helps explain how so many people can purchase real estate that they officially cannot afford.

So frenzied is the Ordos real estate market that some property developers have willingly taken out gray-market loans with interest rates as high as 30 percent.

“The decision was easy,” said the spokesman for one of the city’s biggest developers, who said he could not be identified because his boss had not authorized his talking about underground borrowing.

“We could easily make a 300 percent return on a property development,” the spokesman said. “If you think like that, paying 30 percent interest is really small. Anyone would do it.”

I'm sure it will all be contained.

I mean what could possible go wrong?

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Love this quote:

City leaders, cheered on by aggressive developers, had hoped to turn Ordos into a Chinese version of Dubai

Funnily enough I was in Dubai recently and my perception of it was lots of buildings but few people. My friend lives in a block of apartments which is largely empty, surrounded by others that are the same and a couple that the developers won't sell flats in to try to keep up the price.

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Love this quote:

Funnily enough I was in Dubai recently and my perception of it was lots of buildings but few people. My friend lives in a block of apartments which is largely empty, surrounded by others that are the same and a couple that the developers won't sell flats in to try to keep up the price.

...sounds like trying to make sand scarce in the desert..... :rolleyes:

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The madness of crowds never goes away, does it?

Very reminiscent of Spain, everyone convinced that buying an empty apartment in a block of thousands of identical empty apartments will make them rich.

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  • 140 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
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      • Even
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      • up 5%



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