China’s economy has become the second largest in the world, but its rapid growth may have created the largest housing bubble in history. Lesley Stahl reports.

August 11, 2013 12:52

Category: Real Estate, Video

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11 Responses to “China’s real estate bubble”

  1. ironman says:

    Here’s a bit of background from 2010 – we’ll note that getting good data out of China is a real problem, otherwise we would have followed up that analysis by now. Speaking of which, click the “real estate” tag at the bottom of that post for the more recent analysis we’ve had of the U.S. housing market, which we do monthly.

  2. ironman says:

    It’s more accurate to say that China has other economic bubbles that are influencing its real estate market, which until 2008, was simply along for the ride (we see a similar phenomenon in Canada and Australia). Post-2008, the data we have suggests that China’s real estate market has entered its own bubble, but we don’t have enough good housing price data beyond 2009 to make a more definitive assertion. When it comes to good quality economic data, China is not in the same league as other nations.

  3. ckaussner says:

    Of course it’s a bubble. My question is what is being done to maintain these completed but empty or under construction properties? All homes require a regular diet of routine maintenance to ward off the effects of weather and wear just to maintain their value (let alone appreciate). The issue becomes even more critical when an unfinished building is exposed to the elements. What happens to that partially built “city” once the steel and concrete framework starts decaying because it’s unprotected from the elements? Slow motion train wreck.

    • DeDude says:

      Well you could also just look at it as another form of mindless consumption. In the US middle and upper class people purchase expenesive cars and boats and other toys that slowly deteriorate and lose values. Most of those things are in no way essential or important and really just about insecure people feeling good about themselves and not being bored. In China upper and middle class people purchase real estate to feel secure and good about themselves and their future. In both countries the mindless consumption serve the purpose of creating jobs and growing the GDP.

      • allyssa says:

        Agreed. Imagine how Chinese are dying for buying properties for their children. The phenomenon is like if you don’t buy your child(usually a boy) a condo then he won’t be able to get married. On top of that, rich Chinese are also looking for oversea real estate investment opportunity because it’s the way they hide the money from China government and give money to their children. They are not flippers, they buy a house in cash, keep it for a long time and will not sell it at all.

  4. beaufou says:

    65 million empty apartments and condos, the Government raises real estates sales taxes from 1 to 20% and lowers interest rates this year. If it looks like it and smells like, no need to taste it.

  5. BuildingCom says:

    We still have our own massive housing bubble correction ahead of us.

  6. lucas says:

    Reports from other countries often suffer from differing definitions. The report mentions that 15 years ago, the Chinese government began allowing people to buy apartments. The way the locals explain the policy is that people are not allowed to buy ownership; they are allowed to buy control of the property. This control expires in 70 years. This means if I buy an apartment from another “owner,” what I buy is control. If I buy today, I am buying 55 years of control, at which time control reverts back to the government. As the clock ticks down, this control becomes worth less and less naturally.

    So what will happen in 2068? Nobody knows. Locals believe that if the government enforces the expiration of control, there will be massive social unrest. Locals think (hope) that as the expiration date draws near, the government will simply extend it by fiat.

  7. Mattw says:

    Isn’t misallocation of resources one of the key problems of a state driven economy? China’s superior economic model called state capitalism, otherwise known as fascism, just needs more time to show everyone what a disaster it really is.

    After a long period of stability, a big problem in one area is a sign of big problems in other unrelated areas as well. Only these other problems may be hidden. It is likely when the real estate bubble pops that we will learn about other these problems as well.

  8. icantdance says:

    so fascinating…

    what is the endgame?

    how does chanos even get short?