China Ghost City totally vacant ?
POSTED BY ON November 24, 2010 11:57 am COMMENTS (6)
Millions of Houses are vacant in China and almost the whole city is vacant and called Ghost City . It can have major impact on China real estate and take the whole Real estate sector around the world down ! . What are your thoughts !
Source : http://www.time.com/time/photogallery/0,29307,1975397_2094500,00.html#
@Manish,
China is fiercly competetive and would do all they can to ensure they not be the reason for world market collapse. They enjoy placing blame on others for what’s happening in the world. If bulk of the investment for these ghost cities came from non-Chinese banks / sources, then China will blame western banks / govenment for this in-stability in China but would still try to gain from this by helping promoting these ghost cities. I’m not saying there will be no impact but government will do “something” to show case China (and their policies) are better than rest, capable to shield world from blunders they made in China. Probably, chinese govt realizes this and hence has been converting lot of their US dollar dominating FOREX into gold.
@Jagadees,
In the event banks and real market collapse due to what’s happening in China, India (and other western countries) will not be shielded and we will see a repeat of what happened few years back. Stock market will collapse, banks (mainly western) will become very conservative, there by hitting real estate again. Government, politicians and banks couldn’t do much few years ago and they can’t do much again.
@Manish
Most of the foreign investments who were enamoured by the growth story of china fuelled this bubble and for sure they are going to burnt their fingers badly. The only question is when?
But i guess it wont cause crash in real estate prices in india because indian real estate market is hugely unregulated and there is great nexus with politicians. Even the crash comes govt will direct banks to enhance the liquidity and loan funding to the real estate developers (read as benomis of politicians) as happened in 2008 to wither the tough condition. They wont sell it under reduced price due to funding from bank and once the condition improves they will start to sell at previous record high prices because still there is huge demand for the housing in india.
what do u think?
Jagadees
Jagadees
What you said should have been applicable when US real estate crashed, even then we had a crash ! . Are you saying that we cant have a prolonged bear market in real estate like 3-5 yrs ? But you agree that a blip of 6 months – 1yr is possible ?
Manish
@Manish
yeah i think that there will only a blip of 6 months or so….. then the govt and RBI will step in to increase liquidity in the system and it will help real estate developers to get cheap credit to stay afloat and wont let prices go further down……
Jagadees
I’m not an expert but if I have to “speculate”, it all depends on who funded this and why?
1) If government funded on it’s own, no major immediate impact as government will do all in its power to absorb this, to ensure they retain their stronghold on world economy.
2) If this was funded majorly by Chinese banks, government will silently bail them out. Again, to ensure China do not get blamed for one more economy downturn
3) If this was funded by non- Chinese banks, there could be impact as no buyers means this would get classified as bad asset and we could again see repeat of what happened in US and western countries few years back (major banks failing, eventually leading into economy downturn). If these are government backed / approved projects, government might still bail them out in one way or other.
I would expect government to promote these “ghost cities” big time, doling out generous tax and other benefits to enable people to move out from villages (if they can afford) and congested cities like Beijing / Shanghai to these “ghost cities”
Anil
I dont know , but I am sure that the major investments would be from outsiders, thats why the impact can be huge