Tuesday, April 5, 2011

Fascinating video on over-construction in China

China's Ghost Cities (video)

[Partial transcript] It's 11am on a Thursday morning and Zhengzhou's centre is deserted, shops unoccupied, hundreds of apartments uninhabited. Prices for apartments here range from $70,000 to $100,000 - a fortune in a country where the average worker's annual wage is around $6,000. But units here are selling - the vast majority as investment properties whose owners live in other parts of China. The agent bundled this prospective buyer away before we could talk to her. "Do you imagine that any of these apartments will be occupied in five years?" "I think that the occupancy rate in five years will still be around 25%." Millions of expensive empty homes and millions of Chinese who can't afford to live in them.

Posted by drewster @ 11:28 PM (1740 views)
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15 thoughts on “Fascinating video on over-construction in China

  • Thanks for posting Drewster. The first half was just astonishing – like something out of a science fiction movie. The second half was very depressing.

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  • dohousescrashinthewoods says:

    Ireland?

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  • if chinas bubble implodes what implications for the rest of the world?

    looks like a potential basket case bubble

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  • I suppose the question is will China bail out there banks and Investors? No. I don’t think so. Hopefully this will help with rebalancing investment back into the west.

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  • oil will plunge as will other commodities…all good longer term

    this feels just like 2008 and we know what happened then….trouble is we have more debt than before,countries are in trouble and rates bar one or two are near zero

    the world is awash with money that simply should not exist,whereas, actually money was invented so you didn’t have to carry your goods and produce around with you

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  • It’s called planning

    The Chinese economy is currently growing at such a rate that it will be approximately 30% larger in three years time (compound growth). When Western demand picks up in 2012/2013, their growth rate is likely to further increase, so it is easily possible that their economy will be 60% larger (compound growth) in 5 years time. They will therefore quickly grow into any spare factory/housing capacity.

    The potential for world economic growth and prosperity is (once in a lifetime) huge. That’s why the stock markets have been defying the constant stream of miserable news. An overly pessimistic tendency caused may have caused some of you to miss out on the housing boom. Don’t let the same tendency blind you to the coming economic boom. It’s time to engage

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  • yes but china gdp includes houseprices and construction spend,so they are falsely creating a boom,which is doomed to failure

    increasing populations around the world could have an ADVERSE effect on prosperity

    when people think we are in a new new era,the bubble is certain to pop

    stockmarkets are desperate for the consumer to join the boom so they can then sell their shares and crash the market,but people have been stung twice this decade and are reluctant to participate

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  • taffee: In the nicest possible way, I feel like giving you a good shaking. You really don’t understand GDP or the nature of the stock markets. Do a little reading on GDP and pay particular attention to the path of a spent Dollar. Likewise with stock markets. Do yourself a favour….set a time limit on the “coming collapse” and when it elapses, give it up and move on.

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  • you certainly don’t understand the way china calculates its gdp.as for the stockmarket i’ve traded and studied it for over 10 years and can assure you its a rigged system used to fleece people of their money,

    answer me this….if the problem which caused the credit crunch was too low interest rates for too long and too much debt

    how is more of the same the solution?

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  • We always knew the chinese economy is built on BS, one has to wonder what will when the bubble explodes as there is a huge amount of chinese money in the USA real estate market, they are funding new builds in the USA and buying foreclosed properties.

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  • You are far too simplistic. The stock market is an infinitely complex beast that defies your narrow description. It is often the losing participants who cry foul and claim that it’s rigged. There will always be losers in any activity but in the case of the stock markets they tend to be people who misuse it. Individual speculators are often big losers and quite frankly they deserve what they get. The stock market is not designed for their purposes, so it is hardly surprising that they get chewed up by it. Every time a speculator gets wiped out, a proper participant buys their shares cheaply, for a proper purpose. The speculator then sobs into his teacup and blogs about how they were cheated by a rigged system. They were, in fact, robbed by their abuse of system and by their greed and naivety.

    “answer me this….if the problem which caused the credit crunch was too low interest rates for too long and too much debt

    how is more of the same the solution?”

    You are again being far too simplistic. The credit crunch was caused by many things. Interest rates and debt were just two relatively minor components.

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  • flashman….even the bulls admit its a giant pyramid because there are multiple times amounts over money swashing about the world compared to its calculated wealth.

    I think there are $345 trillion of interest rate derivitives.

    the only reason the US doesn’t default is that its still able to sell its debt.In march along borrowing was 8x income

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  • Your use of the words “bulls” and “giant pyramid” show me where you might be going wrong. The proper participants buy shares so that they have ownership of a share of the profits being made in the world. They are not necessarily bullish or bearish. It’s only a pyramid scheme if you buy or short shares with a view to making a quick buck. People who do that will eventually get wiped out by a pyramid of their own making. When they get wiped out, the proper participants will tend to buy up their shares cheaply with a view to owning production and profits for the long term. It is human nature for the losing speculators to think that the proper participants built up a pyramid to trap them. They did nothing of the sort and if these speculators with their silly charts and patterns would stop trying to cream off some money from real production, profits and ownership, there would far less volatility. Fortunately the small speculators only end up harming themselves and their only achievement is to provide discount shares to proper investors. The downside is that we have to listen to the victims of self inflicted damage going on about rigged markets.

    Interest rate derivatives are a huge subject. They are very useful hedging instruments and the vast majority of them are used properly and are harmless. There is always misuse on the margins and sometimes the balance gets out of kilter. The notional amounts quoted sound big but they are ultimately meaningless.

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  • ontheotherhand says:

    flashman. Just asking. Why isn’t producing a building part of Domestic Product? Whether it is then used or not doesn’t matter does it?

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  • onetheotherhand: Exactly. Then after that, all the building suppliers (materials, labour, design, legal services, infrastructure etc) spend the money they earn from the building work, elsewhere in the economy.

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