Ghostly? China's Property Market Reconsidered

aja8888

aja8888

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Interesting short video on China's real estate market after CNBC did their TX special on it two years ago. This just continues to reinforce my distaste of the CNBC analysis of their material.

"While the media continues to predict China’s imminent collapse, Matthews Asia Investment Strategist Andy Rothman shares insights from a recent research trip to the region and helps investors reconsider China’s property market. As the world’s best consumption story, Andy explains why he believes China’s very soft property market is unlikely to result in a housing crisis."


Video: Ghostly? China's Property Market Reconsidered
 
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It helps to give people a summary so they have at least a clue about why you posted rather than assume everyone will click on a bare link with no info. I happened to have watched the original 60 minutes piece on a Chinese real estate bubble that was pretty scary and guessed this was a followup. Three years ago 60 Minutes went to The Ghost City of Jung Dao (sp?) where we saw block after block of empty apartment building, all bought on "speculation." This video revisits the now bustling town and explains why 60 minutes simply didn't understand how the Chinese real estate market works. Worth watching if you saw the first show.
 
My ad blocker or something else is preventing me from watching....
 
Ed_The_Gypsy said:
I wouldn't invest a penny in 'China'.
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The original show said these were Chinese investing in RE and causing a bubble because they are not able to invest elsewhere. From the OP's video it looks like maybe their investments survived although that is not clear.
 
I would not believe it's bustling without support from the Chinese government. Not to be trusted with economics....
 
aja8888 said:
This just continues to reinforce my distaste of the CNBC analysis of their material.

I'm not getting the CNBC angle. This seems to be about a 60 minutes report, which is CBS.

Having spent waaay to much time in China the only thing I know is that the expectations, approach and mindset is entirely different. 60 minutes often tries to see the world though a US set of eyes.

We had set up an office in what was going to be a commercial building.

Three months before occupancy, there was still nothing there but a rice paddy.

But sure enough, within two more months the building was built, furnished and open, complete with marble lobby, electronics and the whole nine yards!

Its just different.
Click to expand...
 
There was also a follow-up in The Economist a few weeks ago about the ghost cities.

Amazing how they got filled up in just a few short years. From white elephant to (sort of) success story.

China is a strange place, fascinating actually.
 
While there has certainly been massive misallocation of capital in China, the reports of ghost cities are grossly exaggerated and generally reflect a lack of understanding about how the PRC real estate market works. What basically happens is that when a new development is completed, the apartments are sold as shells which the new owners have to fit out with kitchens etc and the amenities (shops, transport etc) tend to follow the fitting out and occupancy of the apartments. Since not many people want to live in an apartment where the neighbors are doing renovations a lot of people delay doing the work on their place. It typically takes about three years for a new "city" to go from a completed shell to a high level of occupancy. There are some cities which are likely to remain under populated (usually because they are in remote locations), but most of the so-called ghost cities get filled in after a while.

One of the better early pieces of analysis which debunked the ghost cities myth was by Nicole Wong of CLSA. Summary here: China’s ‘Ghost Cities’ May Not Be So Spooky - China Real Time Report - WSJ
 
traineeinvestor said:
While there has certainly been massive misallocation of capital in China, the reports of ghost cities are grossly exaggerated and generally reflect a lack of understanding about how the PRC real estate market works. What basically happens is that when a new development is completed, the apartments are sold as shells which the new owners have to fit out with kitchens etc and the amenities (shops, transport etc) tend to follow the fitting out and occupancy of the apartments. Since not many people want to live in an apartment where the neighbors are doing renovations a lot of people delay doing the work on their place. It typically takes about three years for a new "city" to go from a completed shell to a high level of occupancy. There are some cities which are likely to remain under populated (usually because they are in remote locations), but most of the so-called ghost cities get filled in after a while.

One of the better early pieces of analysis which debunked the ghost cities myth was by Nicole Wong of CLSA. Summary here: China’s ‘Ghost Cities’ May Not Be So Spooky - China Real Time Report - WSJ
Click to expand...


+1. Agree!

Keep in mind the typical CNBC or cbs or Wall Street journal reporter is filing his story from the lobby of the Marriott hotel in downtown Puxi Shanghai-- so far from the way things really work that it's a joke. Where is the china crash ? Oh yes. The stock market is up >100 percent in 6 months.

Of course do your own homework.

The China population-migration story is intact and there are approx a half a billion households that will migrate from rural to city in the next two decades. That's a lot of houses to be built ! My next door neighbor is a quadruple millionaire (usd) from his house purchase here in Beijing which he bought a decade ago for 600k USD. sadly I rented all those years (stupidly i have been too conservative an investor) ..

ImageUploadedByEarly Retirement Forum1432611920.162844.jpg

ImageUploadedByEarly Retirement Forum1432611822.782104.jpg

A view out my train window on the high speed train in shaanxi province china today.
 
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